Tax advice that halfway house between legal and accounting
One consequence of the massive economic changes that have taken place in this part of the world during the past 12 years has been the emergence of various significant trends.
I was going to use the phrase "after the fall of the Berlin Wall" rather than "during the past 12 years" in the preceding sentence, but that would have meant I had broken one of my invariable rules of thumb, as applied to economic transformation in Central and Eastern Europe. The rule that I have found to always hold true is that all articles about changes in the economies of Central Europe that start with the words "After the fall of the Berlin Wall" or the equivalent, unless they are applied exclusively to the former East Germany, are always far too general or uninteresting for us regional frontier types. After all, it takes but a few minutes of reading up on recent history to discover that Poland had already had elections before the aforementioned piece of demolition.
One consequence that nobody anticipated at the time was the major change in the lifestyle prospects of chartered accountants.
Imagine the scene, November 1989, and the BBC news cuts to John Simpson in Berlin, Prague, or one of the other places that he describes in his memoirs. "The former president has just left the country by private plane/resigned/been imprisoned, and the reformers have instituted a new government. One of their first requests to President Bush and Prime Minister Thatcher has been to send a planeload of chartered accountants over to help them restructure their ailing, failing economies."
Cut to London and scenes of queues forming at the Institute of Chartered Accountants where quiet bespectacled pinstripe types are being interviewed by another reporter. "We believe that the restructuring of the economy can best be accomplished by an immediate move to accounting under GAAP principles, and 37 of my colleagues will be flying over tomorrow to help."
Well, it didn't quite happen like that. But the reality is not as boring as our image suggests. Some day, many years from now, someone will try and work out why there is a small but significant trend for British chartered accountants born between 1960 and 1970, regardless of where they will be living by then, to have Polish wives.
One of the consequences of a centrally planned economy was that while there was plenty of need for counting things and keeping books, the idea of a strategic role in the organization for finance people was, to say the least, underdeveloped. And unlike our American cousins who graduate a ton of lawyers a year, at that time about 10% of all U.K. graduates went on to train as accountants.
For many of them, it was just a way to study for three more years, get a qualification, and only then really think about what you want to do when you grow up. Which meant that when the last recession-style event happened in 1991-1992, there was a certain spare capacity of freshly qualified ACAs, just when the business changes were taking off here. And so we came.
Over the years Polish laws have moved far closer to Western standards. The local qualifications have changed to reflect this. And Polish staff that joined the major firms in the early 1990s have in many cases passed U.K. or U.S. examinations as well as Polish, leaving them qualified under two regimes. Meanwhile, that small and vocal minority of us has remained.
Now the practice of tax is in some countries considered to require an accountancy background, and in some countries, more of a legal one. In practice, it is the area where the two professions overlap more closely than any other. Tax regulations run direct from the law far more than more regular accounting, which runs more from principles, policies and judgment of business issues. But at the same time calculation of a tax liability is also a numerical issue. Needless to say, both professions claim it as theirs, which I suppose is better than accountants saying it's for lawyers, and having the lawyers say that they don't want to touch it.
The law on the provision of tax advice in Poland was introduced in 1996 to regulate the industry, to stop anyone offering tax advice without appropriate qualification.
Now, I'm not necessarily sure of the benefits of imposing by law a regulatory requirement on specific industries. Standards and codes of conduct must of course be maintained, and it is probably necessary to stop people receiving advice from any unqualified person professing to give tax advice, when this could lead taxpayers to being in big trouble if the advice goes wrong.
It is one of my perverse claims to fame that when they introduced the law regulating tax advisers, an interim registration was permitted for people who had a certain number of years experience, to enable them to continue in business for a few years until they could pass the exam. One of the requirements was that these people needed to be Polish. By my estimate, there were no more than three or four people that met the experience requirement and were not Polish. One of them was me. So this is the closest I have ever come to having a law passed applying to me personally. (I suspect that this story may become embellished over the years as I repaint myself as the Tax Adviser They Tried To Ban).
Today, the profession has settled down into that halfway house between legal and accounting, and seems to have carved out its own role in the professions in Poland. One of the more interesting ways of demonstrating this is that, when asked what they do for a living, our staff tend to say "tax adviser" rather than "lawyer" or "consultant" (but virtually never say "accountant"), even where they have law degrees and would in the past call themselves lawyers, even if they hadn't passed their full practicing certification.
Peter Ferrigno is a partner in the Warsaw office of Arthur Andersen.
