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SPRING 2013

SHARING INFORMATION, BUILDING RELATIONSHIPS IN THIS ISSUE LETTER FROM THE PRESIDENT P.1

LETTER FROM THE PRESIDENT

CYPRUS AND SPAIN DOUBLE TAX TREATY P.2 CONFERENCES CALENDAR P.3 FITCH RATINGS MALTA P.4 STEPHANO SLACK EXPANDS EXPERTISE & WHAT DOES THE AMERICAN TAXPAYER RELIEF ACT MEAN FOR YOU? P.5

Dear Friends and Colleagues, Yet another summer is almost upon us and I just wanted to take this opportunity of wishing you all a wonderful and well deserved vacation. However, before you leave, I have a few points I want to bring to your attention: 1)

Our organisation is subject to a long list of bad debts and up until now we have been far too tolerant with these members. It has been decided that a full list of the “delinquent” payers will be sent to the full membership before the AGM in London, with the details of what they owe and how far the debt goes back in time. Please check, immediately, with Beverley, if you have a doubt as to whether you are up to date with all your payments, subscriptions as well as conference participation. 2013 will be a zero-tolerance year, we have been far too lenient in the past with bad payers and this is unfair to the rest of the membership.

2)

You all received an e-mail, in May, requesting your input on the website content, format and presentation, as we are considering a “re-vamp”. Very few people have reacted and as there will be a workshop on this subject at the AGM in London, we would appreciate your comments as soon as possible in order to organise the meeting and make it as profitable and interesting to all those attending. Please contact Beverley (bleonache@igal-network.com) and Marie Barr (mariebarr@barrpomeroy.ie).

ECONOMIC SURVEY SPRING 2013 P.8 ZURICH MIDTERM MEETING P.10

IGAL – Intercontinental Grouping of Accountants and Lawyers 2 rue Marie Laurencin 78200 Buchelay – FRANCE Website:www.igal-network.com

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IGAL NEWSLETTER – SPRING 2013

3) You should have all received by now the parcels containing the new directories and brochures. Several have been returned to Beverley with the note on them “uncollected” or “refused” These are from the following members: PENA LOZANO FAURA STEPHANO SLACK YARON SAHAR RAYS CHAN

MAY & COMPANY C&C YEMINLI A KLEIDERMACHER LUIGI STAFICCO

Can you please let Beverley know the reason for this return in order to prevent it happening next time and also whether you want her to send them again? From now on Beverley will only be sending the updated or additional inserts and a list of the pages to be discarded. The clip folders are guaranteed 10 years, hence the important costs incurred for this current accounting year, so if, with “normal” treatment they break or don’t work properly, please return the faulty file to her and it will be replaced. 4) I would once again, like to emphasise the point that we are continually wanting articles for the Newsletter. It can only be sent out if we have something to put in it. All our new members are encouraged to write a paper on their firm, preferably with photographs, so that the members who didn’t get a chance to meet you yet can at least have an idea of where you are, what you do and what you look like. 5) Finally, as you all know the Tax Committee, initiated and run by Peter Gassen is a great success. So much so that we are hoping to set up a Labour Law Committee. This will be chaired by Jane Laidler – GRM Law our law firm in London, (j.laidler@grm.co.uk). This committee will also be one of the workshops at the AGM in London. If you are interested in joining this group and already have some ideas about its content, please let Jane know with a copy to Beverley so that she can monitor the interest.

Cyprus and Spain sign Double Tax Treaty By Totalserve Management Ltd – Andis Petrou Limassol, February 2013 – Cyprus and Spain have signed a Double Tax Treaty, effectively removing Cyprus from the Spanish ‘blacklist’. The development is expected to encourage investments between the two countries, which were so far hindered due to the blacklist. The bilateral agreement was signed in February 2013 by representatives of both countries and shall come into force three months after its ratification. The treaty will apply for taxes on income and capital, at the beginning of the year following the date the treaty enters into force. The agreement is in line with the OECD model tax convention of 2010 on all aspects (e.g. permanent establishment and exchange of information provisions). The withholding tax rates on dividends, interest and royalties is 0%, whereas in the case of dividends there shall be a 5% withholding tax if the participation holding is less than 10%. It is noted that Cyprus does not impose any withholding taxes on outbound payments. Capital gains on property rich companies are taxed where the property is situated. The agreement does not include a Limitation of Benefits clause, even though the protocol to the treaty specifies that domestic anti-abuse provisions shall be applied in cases of misuse.

Please contact me or Beverley if you have any particular ideas or requests that will make our network as dynamic and professional as possible. Once again have a good vacation and see you in London 2 – 6 October 2013. Carl-Gustav Lönnborg

Peter G. Economides , FCCA,TEP Chairman peter.economides@totalserve.eu TOTALSERVE MANAGEMENT LTD Totalserve House 17, Gr. Xenopoulou Street 3106 Limassol, Cyprus

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IGAL NEWSLETTER – SPRING 2013 IGAL CALENDAR

IGAL – Director of Marketing/Newsletter João Henrique de Souza Brum IGAL – Newsletter Editor Beverley LEONACHE

Annual 2013 – LONDON 2 – 6 October 2013

Contributors for this Issue IGAL DIRECTOR OF Carl-Gustav Lönnborg MARKETING/NEWSLETTER Beverley Léonache João Henrique de Souza Brum NewsletterIGAL Submissions: Newsletter Editor bleonache@igal-network.com Beverley Léonache

Collaborators for this Issue: Carl-Gustav Lönnborg Contact: IGAL AdministrationAndis Petrou Camilleri Madame BeverleyDaniel Léonache Kenneth Slack & Michael J. Stephano 2 Rue Marie Laurencin, .Renato Murer 78200 Buchelay, France bleonache@igal-network.com Newsletter Submissions t: +33Kindly 1 30 42 71that 83 all newsletter submissions: note must electronically by f: +33 1 34 97 be 13 submitted 22

Midterm 2014 – DUBLIN 25 – 27 April 2014

members and accompanied by a signed waiver; become the property of IGAL; and are subject to editing by IGAL. Comments and suggestions can be sent to: newsletter@igal-network.com.

Subscribe to the IGAL Newsletter To receive a complimentary e-subscription of the IGAL Newsletter, go to: www.igal-network.com/Subscribe.aspx

About IGAL The Intercontinental Grouping of Accountants and Lawyers (IGAL) is a leading business network of legal and accounting firms whose members offer superior services related to legal, financial, tax and insolvency matters to companies and individuals with international activities; as well as expert and personal assistance to reduce the obstacles of doing business in a foreign environment and at a distance.

Annual 2014 – RIO DE JANEIRO 22 – 26 October 2014

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IGAL NEWSLETTER – SPRING 2013

Daniel Camilleri Fitch Ratings-London-16 April 2013 The differences between the Maltese and Cypriot banking systems far outweigh the similarities, meaning the Maltese banking sector does not present the same level of risk to the sovereign that was seen in Cyprus, Fitch Ratings says. In a special report published today, we compare the size of the Maltese and Cypriot banking sectors, their funding sources, asset quality, and capitalisation. While both Malta and Cyprus seemingly have large banking sectors that substantially exceed the size of their economies and that rely to some degree on funding from non-resident depositors, a closer examination reveals substantial differences. Malta's whole banking sector has assets worth 789% of GDP, making it the Eurozone’s second largest (after Luxembourg) and outstripping Cyprus, where total banking assets accounted for 672% of GDP in H112. However, using the Central Bank of Malta's categorisations, "international banks" with negligible links to the domestic economy have assets worth 494% of GDP. "Core domestic banks" that have strong links with the domestic economy and are considered systemically important account for 218% of GDP. "Non-core domestic banks" with smaller operations and links with the domestic economy account for 77% of GDP. We think the government of Malta would support the core domestic banks, but would be less likely to support noncore domestic banks and would be very unlikely to support international banks (where support would come from the parent bank or its home government). We also believe that for at least one of the core domestic banks, HSBC Bank Malta, the bulk of support would also come from the parent. So the contingent liability that potential bank support places on the Maltese sovereign - around 128% of GDP is significantly lower than in Cyprus, where the domestic banking sector, accounting for 466% of GDP, proved too big for the sovereign to support. The Maltese banking system is also less vulnerable to a destabilizing withdrawal of non-resident deposits than its high proportion of non-resident deposits suggests (68.8%, compared with 37% in Cyprus). The majority of these deposits are in international banks, mostly the deposits of the parent banking groups, which present a

lower risk of capital flight than other types of foreign deposits (such as deposits of wealthy foreigners). Only 17% of deposits in Malta's core domestic banks are from non-residents. Looking ahead, the possible long-term shift in the stance of the European (and global) authorities towards offshore financial centres spells some danger for Malta's financial services "business model". Financial and insurance activities represented 8% of Maltese value added in 2011 (9% in Cyprus; 5% for the Eurozone on average), but this figure does not take into account other sectors supporting this activity. For our full analysis, see "Malta and Cyprus: Differences Outweigh Similarities" at www.fitchratings.com. We rate Malta 'A+' with a Stable Outlook; Cyprus at 'B' on Rating Watch Negative. http://www.fitchratings.com/creditdesk/press_releases/d etail.cfm?pr_id=788675 Daniel Camilleri B. Accty (Hons), MIFSP, CPA Director Assurance accountancy advisory tax Camilleri Galea Ltd. 1st Floor, Suite 3, Central Business Centre 1170 Mdina Road, Zebbug 9015, Malta Telephone : 00356 2146 0200 Mobile : 00356 7944 9104 Fax : 00356 2540 Website : www.cg.com.mt Email : daniel@cg.com.mt Skype : daniel.cgcpa

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IGAL NEWSLETTER – SPRING 2013

Kenneth H. Slack, CPA, Partner

Michael J. Stephano, CPA, Managing Partner

STEPHANO SLACK EXPANDS EXPERTISE Stephano Slack has added three new, senior-level members to the firm: John Quigg, CPA and Tax Manager, William Zenszer CPA and Accounting and Auditing Manager, and Jamie Devers, Senior Tax Associate. In addition, Stephano Slack has added two new Staff Accountants, Amber Vieira and Cynthia Talone. Each brings unique perspectives and experiences, which will help Stephano Slack address new business opportunities and clients’ ever-evolving needs.

WHAT DOES THE AMERICAN TAXPAYER RELIEF ACT MEAN FOR YOU? On New Year’s Day 2013, Congress passed a farreaching new law intended to avert the so-called fiscal cliff. The American Taxpayer Relief Act, signed into law by President Obama on January 2, 2013, impacts every taxpayer. Not only does the new law make permanent reduced income tax rates for most taxpayers, it extends either permanently or temporarily a host of other tax incentives. At the same time, the new law creates valuable tax planning opportunities. Not all provisions, however, are good for all taxpayers. Those individuals with income above $400,000 ($450,000 for families) are now subject to a new top income tax rate of 39.6 percent and a new capital gains maximum rate of 20 percent. And, all taxpayers will be taxed two percent more in 2013 than in 2012 on wages and self-employment income up to the Social Security employment tax wage base ($113,700). Our office can help you plan a tax strategy that reflects the important changes in the American Taxpayer Relief Act.

For individuals Tax rates Unless Congress acted, taxpayers in all incomes groups were looking at a tax hike in 2013 because of the expiration of the Bush-era tax cuts and the 2012 payroll tax holiday. The long-time bracket structure of 10, 15, 25, 28, 33, and 35 percent was scheduled to revert to 15, 28, 31, 36 and 39.6 percent after 2012. On top of that, the payroll tax holiday reduced the employee-share of Social Security taxes (with a comparable benefit for selfemployed individuals) for two years: 2011 and 2012. The American Taxpayer Relief Act preserves and permanently extends the Bush-era income tax cuts except for single individuals with taxable income above $400,000; married couples filing joint returns with taxable income above $450,000; and heads of household with taxable income above $425,000. Income above these thresholds will be taxed at a 39.6 percent rate, effective January 1, 2013. The $400,000/$450,000/$425,000 thresholds will be adjusted for inflation after 2013. The new law, however, does not extend the payroll tax holiday. Effective January 1, 2013, the employee-share of Social Security increased from 4.2 percent to 6.2 percent (its rate before enactment of the payroll tax holiday). The net result is that all individuals who receive wages (and self-employed individuals) will see less takehome pay in 2013. Capital gains Effective January 1, 2013, the maximum tax rate on qualified capital gains and dividends rises from 15 to 20 percent for taxpayers whose incomes exceed the thresholds set for the 39.6 percent rate (the $400,000/$450,000/$425,000 thresholds discussed above). The maximum tax rate for all other taxpayers remains at 15 percent; and moreover, a zero-percent rate will continue to apply to qualified capital gains and dividends to the extent income falls below the top of the 15- percent tax bracket. Alternative Minimum Tax The alternative minimum tax (AMT) was put in place more than 40 years ago to ensure that very wealthy individuals did not escape taxation. Due to many factors, including the fact that the AMT was not indexed for inflation, the AMT has encroached on middle-income taxpayers. In recent years, Congress routinely “patched” the AMT by increasing the exemption amounts and making other relief available. These patches were just that: temporary measures. The American Taxpayer Relief Act permanently patches the AMT by increasing the exemption amounts and indexing them for inflation. Retirement savings The American Taxpayer Relief Act makes a valuable change to the treatment of retirement savings and opens up an important planning opportunity. Generally, participants with 401(k) plans and similar plans have

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IGAL NEWSLETTER – SPRING 2013 been allowed to roll over funds to designated Roth accounts in the same plan subject to certain qualifying events or age restrictions. The American Taxpayer Relief Act lifts most restrictions, and now allows participants in 401(k) plans with in-plan Roth conversion features to make transfers to a Roth account at anytime. Congress made this change because conversion is a taxable event and will raise revenue. Estate tax Federal transfer taxes (estate, gift and generationskipping transfer (GST) taxes) seem to have been in a constant state of flux in recent years. The American Taxpayer Relief Act aims to provide some certainty. Effective January 1, 2013, the maximum estate, gift and GST tax rate is generally 40 percent, which reflects an increase from 35 percent for 2012. The exclusion amount for estate and gift taxes is unchanged for 2013 and subsequent years at $5 million (adjusted for inflation). The GST exemption amount for 2013 and beyond is also $5 million (adjusted for inflation). The new law also makes permanent portability and some enhancements made in previous tax laws. Tax credits and deductions Like the Bush-era income tax cuts, many popular tax credits and deductions were scheduled to expire after 2012 (in some cases, they expired after 2011). The American Taxpayer Relief Act makes some of these incentives permanent and extends others. One of the most widely used tax credits, the $1,000 child tax credit, is made permanent. If Congress had not acted, the $1,000 child tax credit would have decreased to $500 per qualifying child for 2013 and beyond. The $1,000 amount is not, however, indexed for inflation. Other popular tax credits and deductions for individuals made permanent or extended by the new law include:  Enhanced adoption credit/exclusion (permanent)  Enhanced child and dependent care credit (permanent)  Enhanced student loan interest deduction (permanent)  American Opportunity Tax Credit (through 2017)  Higher education tuition deduction (through 2013)  IRA distributions to charitable organizations (through 2013)  Transit benefits parity (through 2013)  Cancellation of indebtedness on principal residence (through 2013)  Code Sec. 25C residential energy efficient property credit (through 2013)  Teachers’ classroom expense deduction (through 2013) The American Taxpayer Relief Act also revives the Pease limitation and personal exemption phase out (PEP) for higher-income taxpayers after 2012, but not at

their former levels. Generally, individuals with incomes over $250,000 and married couples with incomes over $300,000 will be affected . Planning opportunities The American Taxpayer Relief Act opens tax planning opportunities because it impacts so many tax rules, everything from income rates to retirement planning. Congress intended to make permanent many of the changes, which creates a climate for tax planning unlike the recent past where uncertainty was the rule and not the exception. Please contact our office and we can make an appointment to discuss how the American Taxpayer Relief Act can help maximize your tax savings.

For businesses As 2012 ended, the national debate focused on the expiration of the Bush-era tax cuts and the so-called fiscal cliff. On January 1, 2013, Congress passed, and President Obama signed the next day, the American Taxpayer Relief Act. The new law includes some valuable business tax incentives. Many of these business tax incentives are temporary so taxpayers have a limited window in which to maximize their potential tax savings. We note that conspicuous by their absence is any increase in corporate tax rates or reduction in corporate tax “incentives”. Tax rates Depending on how a business activity is structured, it may be taxed as a corporation or its owners may pay taxes at the individual rates. The American Taxpayer Relief Act permanently extends the Bush-era income tax cuts except for single individuals with taxable income above $400,000; married couples filing join returns with taxable income above $450,000; and heads of household with taxable income above $425,000. Income above these thresholds will be taxed at a 39.6 percent rate, effective January 1, 2013. The $400,000/$450,000/$425,000 thresholds, which will be adjusted for inflation after 2013, are also used to determine the point at which the maximum tax rate on capital gains and dividends for an individual rises from 15 percent to 20 percent. Bonus depreciation Bonus depreciation is one of the most important tax benefits available to businesses, large or small. In recent years, bonus depreciation has reached 100 percent, which gave taxpayers the opportunity to write off 100 percent of qualifying asset purchases immediately. For 2012, bonus depreciation remained available but was reduced to 50 percent. The American Taxpayer Relief Act extends 50 percent bonus depreciation through 2013 (through 2014 in the case of certain period production property and transportation property). The American Taxpayer Relief Act also provides that a taxpayer

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IGAL NEWSLETTER – SPRING 2013 otherwise eligible for additional first-year depreciation may elect to claim additional research or minimum tax credits in lieu of claiming depreciation for qualified property. While not quite as attractive as 100 percent bonus depreciation, 50 percent bonus depreciation is valuable. For example, a $100,000 piece of equipment with a fiveyear MACRS life would qualify for a $55,000 write-off: $50,000 in bonus depreciation plus 20 percent of the remaining $50,000 in basis as “regular” depreciation, with the half-year convention applied in the first and last year. Bonus depreciation also relates to the vehicle depreciation dollar limits under Code Sec. 280F. This provision imposes dollar limitations on the depreciation deduction for the year in which a taxpayer places a passenger automobile/truck in service within a business and for each succeeding year. Because of the new law, the first-year depreciation cap for passenger automobile/truck placed in service in 2013 is increased by $8,000. Bonus depreciation, unlike Code Sec. 179 expensing (discussed below), is not capped at a dollar threshold. However, only new property qualifies for bonus depreciation. Code Sec. 179 expensing, in contrast, can be claimed for both new and used property and qualifying property may be expensed at 100 percent. Expensing The American Taxpayer Relief Act enhances or extends several expensing provisions. These include Code Sec. 179 small business expensing, 15-year recovery period for qualified leasehold and retail improvements and restaurant property, special expensing rules for film and television productions, and a seven-year recovery for motorsports complexes. Code Sec. 179 expensing. In recent years, Congress has repeatedly increased dollar and investment limits under Code Sec. 179 to encourage spending by businesses. For tax years beginning in 2010 and 2011, the Code Sec. 179 dollar and investment limits were $500,000 and $2 million, respectively. The American Taxpayer Relief Act boosts the dollar and investment limits for 2012 and 2013 to their 2011 amounts ($500,000 and $2 million) and adjusts those amounts for inflation. Keep in mind that the increase is temporary. The Code Sec. 179 dollar and investment limits are scheduled, unless changed by Congress, to decrease to $25,000 and $200,000, respectively, after 2013. The new law also provides that off-the-shelf computer software qualifies as eligible property for Code Sec. 179 expensing. The software must be placed in service in a tax year beginning before 2014. Additionally, the American Taxpayer Relief Act allows taxpayers to treat up to $250,000 of qualified leasehold and retail improvement property as well as qualified restaurant property, as eligible for Code Sec. 179 expensing. Leasehold, retail and restaurant property. The American Taxpayer Relief Act extends for 2012 and 2013 the special treatment of qualified leasehold and retail

improvement property and qualified restaurant property as eligible for a 15-year recovery period. Otherwise, this property generally is depreciated over a 39-year recovery period. To take advantage of this enhanced expensing, the qualified property must be placed in service before January 1, 2014. Film and television. A special expensing rule allows taxpayers to elect to deduct certain costs of a qualified film or television production in the year the costs are paid or incurred. The American Taxpayer Relief Act extends this rule through 2013. Motorsports property. Qualified motorsports complexes may be eligible for a seven-year straight line cost recovery period. The American Taxpayer Relief Act extends this treatment through 2013. Work Opportunity Tax Credit The WOTC expired after 2011 with an exception for employers that hire qualified veterans. The American Taxpayer Relief Act extends the WOTC (including the special rules for veterans) through 2013. Each new employee hired from a targeted group generally entitles an employer to a credit equal to 40 percent of first-year wages, up to $6,000. Research tax credit and other incentives The American Taxpayer Relief Act extends through 2013 the Code Sec. 41 research tax credit. The credit had expired after 2011. The new law, however, does not make the credit permanent as had been proposed by President Obama and some lawmakers. Along with the research tax credit, the American Taxpayer Relief Act also revives through 2013 many other expired incentives, including:  Employer wage credit for activated military reservists  Reduced recognition period for S corporation built-in gains tax  Indian employment credit and accelerated depreciation for business property on Indian reservations  Code Sec. 45 production tax credit for renewable energy  Credits for biodiesel and ethanol  Incentives for manufacturers of energy-efficient new homes and appliances  Railroad track maintenance credit  Mine rescue team training credit Planning opportunities Unlike many of the individual incentives in the American Taxpayer Relief Act, many of the business tax benefits are not made permanent. As a result, planning to maximize tax savings under these extended incentives takes on a new urgency. Please contact our office and we can discuss how the American Taxpayer Relief Act can help maximize your tax savings. Stephano Slack LLC

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IGAL NEWSLETTER – SPRING 2013 Economic Survey – Spring 2013

Renato Murer – Studio Murer Commercialisti 1 – The international economic situation In spite of the significant efforts carried out by individual governments and European institutions, the impact of the crisis which started in 2008 has gradually worsened, continuously pointing out new critical points, not least that of sovereign debts, which required new fiscal and budgetary policies that caused recession and owing to the lack of employment, alarmingly increased the unemployment rate, among young people in particular. The risks for the global economy, however, softened by the US agreement to avoid the fiscal cliff and the easing of financial tensions in Europe and higher growth prospects, are still present and require cautious policies by governments and supra national financial institutions. In 2012, the global economy remained weak (+3.2%) and the results attained were lower than those registered in 2011, especially in the Eurozone (-0.9%) where the effects of the financial tensions which involved some countries and the consequences of fiscal consolidation policies affected also the strongest economies: in the last quarter of 2012, the worst setback since 2009 was registered. Neither could the main European economies escape this situation amongst which are Germany (-0.6%), France (-0.3%) and for the third quarter in a row, the whole Eurozone (-0.6%), at the end of 2012, which did not show any signs of recovery but instead confirmed that recession is persisting. The economic slowdown also affected emerging national economies (BRICS), always led by China (+7.8%) followed by slightly underperforming India, which registered the lowest growth over the last decade (+4.5%), Russia (+3.6%), South Africa (+2.3%) and Brazil (+1%), which confirms the critical situation it has gone through over the last few months. USA growth rate averaged +2.3%, showing a slight improvement compared to 2011 results. The easing of financial tensions, thanks to the higher credibility acquired by national governments and the agreement reached by the EU for the creation of one single banking supervision mechanism, did not facilitate access to credit for companies and private households. The cost of funding – where possible – in the countries affected by the crisis is still higher than that of the other European countries.

According to the experts, estimates for 2013 and 2014 show a decreasing trend compared to previous estimates and foresee a very difficult situation for the European economy which is still struggling. According to the IMF, global growth will recover slightly in 2013 (+3.5%) and in 2014 (+4.1%), whereas forecasts for the Eurozone confirm a recession for 2013 (-0.2%), with a slight growth expected for Germany (+0.6%) and France (+0.3%) but still a dramatic recession for Italy and Spain. 2014 should finally bring recovery to the Eurozone (+1%), thanks to the growth which is expected in Southern European countries, including Italy. Compared to the minimum levels registered in 2012 and in spite of being below pre-crisis levels, emerging national economies are expected to recover, both in 2013 (China +8.2%, India +5.9% and Brazil +3.5%), and in 2014 (China +8.5%, India +6.4% and Brazil +4%), whereas the Russian GDP should remain substantially stable (+3.7 - +3.8%); the situation of the ASEAN-5 countries is quite interesting: their GDP is confirmed to be higher than 5%. Growth in the USA should go on at the current pace (+2% in 2013 and +3% in 2014). Unemployment is a very worrying phenomenon which is spreading at global level: the number of unemployed is currently at 200 million and it is expected to increase until 2017. In 2012, in Europe, the number of unemployed hit the record of 26 million, 18.7 million of whom are in the Eurozone (approximately 11.7% compared to 10.4% in 2011) with peaks of 26.1% in Spain and almost 27% in Greece. The number of unemployed people in France exceeded 3 million, thus registering an increase by 10% with respect to 2011. Youth unemployment (<25 years of age) is becoming increasingly serious: in Europe it affects 5.7 million young people, 3.6 million of whom are within the Eurozone (amounting to 24%) with peaks of 57.6% in Greece and 55.6% in Spain. As already pointed out, the austerity measures implemented by national governments in 2012 led to the easing of tensions on financial markets and there are also some positive signs for the future: the European economy is stabilizing and confidence is slowly being restored. Instability, or even worse, the strengthening of the Euro against the main currencies, might hinder growth, whereas the need for keeping the accounts in order to avoid new financial tensions makes it difficult to eliminate the main causes of the recession over the last few months (fiscal pressure, reduction in investments). The efforts of future national governments will have to focus on easier access to credit for firms and individuals as well as on structural reforms, improving the competitiveness of companies will speed up recovery and reduce unemployment. The need for a better European integration is increasingly pressing and cannot be neglected. The crisis and the consequent reduction in demand means that the prices of raw materials and crude oil have either remained stable or have slightly decreased, experts estimate that in 2013 prices of raw materials will remain stable except for the price of copper which is expected to

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IGAL NEWSLETTER – SPRING 2013 increase owing to the growing demand by emerging countries; the price of crude oil is expected to remain stable in 2013 and to decrease in 2014. In 2012 inflation reached 2.6% in Europe, 2.5% in the Eurozone, 2.1% in the USA and 2.4% in China (these values are lower than those of 2011), whereas it remained stable in the other BRIC countries, except for India, where it was at 11%. According to the experts, the inflation rate in the Eurozone will reach approximately 1.8% in 2013, whereas it will remain stable in 2014 and it is supposed to be decreasing slightly in 2015. 2 – The Italian economy The Italian situation seems to be one of the most critical in the Eurozone. Despite the fiscal consolidation measures implemented by Italy, the Italian debt crisis which reached its peak at the end of 2011 leading to the resignation of the government in power and the formation of the technical government was partially settled, thus reducing the pressure on the yield spread of government bonds, thanks to the strong austerity measures which were implemented and to the greater credibility of the new government at international level. At the end of 2012, the Italian debt was just lower than 2,000 billion Euros, amounting to approximately 127% of the national GDP and growing with respect to 2011, not only due to the financial support given by Italy to the countries belonging to the Eurozone, but also as a result of a public debt which had been out of government control during previous legislatures, delays in the implementation of the reforms which were necessary to curb public expenditure and the cost of public welfare brought by the crisis and huge tax evasion. Italian macro-economic indicators are still quite worrying showing a drop of the Italian GDP (-2.7%), a reduction in industrial production (-6.7% compared to 2011, the lowest on record since 1990), with peaks on intermediate and consumer goods, whereas reductions are less significant in the fields of energy (-3.7%) and capital goods. Company confidence index is decreasing and the Italian turnover has dramatically decreased as far as the internal market is concerned, which was up to now partially compensated for by the increase in exports; turnover is however definitely lower than 2011 (-4.3%); also the amount of orders is significantly lower (-15.3% compared to 2011). Inflation, however decreasing at the end of the year thanks to the reduction in the prices of energy-related products, was at 3%, showing further increase with respect to 2011 (2.8%) and being the highest percentage on record since 2008; the worst results were registered in consumer goods which increased by 4.3% on average. In 2011, the gap between the increase in hourly rates (+1.5%) and inflation reached the highest level since 1995 and it is expected to grow further. The unemployment rate is extremely worrying: in 2012 it reached the new record high of 11.2%, amounting to approximately 2.88 million people, whereas youth unemployment reached 36.6%. Redundancy (amounting to 1.09 billion hours in 2012) increased by 12.1% with respect to the previous year, with

an increase in the number of applications for unemployment (+14.9%) and mobility allowance (+17.8%). Despite the easing of financial market tensions, economic forecasts for 2013 show that the Italian economy will be affected by further recession, the GDP will decrease by 1% yet registering a slight increase in 2014 (+0.5%). It is absolutely necessary that both the parliament and the government are willing and able to carry on with the increasingly urgent structural reforms the country needs, starting from the labour market reform, shifting protection from the workplace to the worker’s income. Amongst the priorities there are, therefore, tax wedge reduction, simplification of legislation, the introduction of new incentives for productivity and new tools for the integration of young workers in the labour market thanks to training and apprenticeship programs. Last but not least, improving and simplifying the tax system is fundamental, avoiding demagogic amnesties and focusing on the reduction of fiscal distortions and evasion incentives. 3 – Trend of the markets There is no need to list all the difficulties which firms and professionals both have to face and the efforts they have to make to keep on looking for new business opportunities, especially for exports, new markets and products have to be sought, at the same time, they have to keep their organizations profitable and must curb costs. The contribution given by the price of raw materials and the Euro was positive in 2012, since they remained stable for the majority of the year. It was only during the last period of the year, when the Euro, due to the currency policies implemented by other countries, started to strengthen thus weakening exports and, as a result, slowing down recovery in the Eurozone and in Italy in particular. Another handicap for exports was and still is the social and political tension which is persisting in many parts of the world, in particular in the Islamic countries of the Middle East and, more recently, in Northern Africa, creating hostile conditions for investment and new business opportunities.

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IGAL NEWSLETTER – SPRING 2013 ZURICH – a diverse, open city with a passion for life Our great midterm meeting in Zurich 3 – 5 May took place at the Steigenberger hotel, perfectly situated with a wonderful view of Lake Zurich.

It started with a dinner for around 30 of the participants who arrived early at the Seegarten Restaurant Latino, just walking distance from the hotel.

Whilst the accompanying persons were able to contribute to the Swiss economy, as if it needs it, the delegates were able to listen to 2 very interesting speakers. -

Dr. Daniel Suter Assessment”

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Dr. Rudolf Strahm “The Dual Educational System of Switzerland” “Why we are so rich”

“Regulations: Update and

We were all able to spend a leisurely afternoon together starting with a relaxing boat trip to Halbinsel Au. An energetic walk up to breath-taking views and a superb restaurant opened our appetites for lunch.

Although we had an enormous thunderstorm and torrential rain, nothing was going to dampen the high spirits of those present. Whilst the hard working board had their meeting Friday, the early arrivals, wishing to participate, had a guided tour, on foot, of the main areas of the city of Zurich, chaperoned by our hosts Urs Specker and Thomas Esslinger.

After enjoying the lunch and admiring the scenery we all piled back into the boat for our trip back to the city. Kindli Restaurant was our venue for the final dinner together, situated in the “Old Town” of Zurich. After a short tram ride and leisurely walk we enjoyed our last few hours together and of course celebrating our dear friend Pedro Pascual’s birthday.

They were able to see the cultural and historical sites of the city and enjoy a casual stroll around the lake. Friday evening saw the start of the official meeting with our reception and dinner at the G27 event hall which was once a joiner’s workshop.situated a short bus ride from the hotel.

After a final drink at the hotel bar we all said our good byes and fixed our next reunion in London 2 – 6 October 2013.

10

International Accounting and Law Firm Newsletter 2013  

IGAL International Grouping newsletter on sharing information and building relationship.

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