Compliance – Hot Topics for SMEs

But what are the cur­rent hot topics in com­p­li­ance for SMEs? That is pre­ci­sely the sub­ject of the second part of our recently pub­lis­hed study "Com­p­li­ance - Brenn­punkte im Mit­tel­stand", which we again pub­lis­hed in con­junc­tion with the Insti­tut der Frank­fur­ter All­ge­meine Zei­tung (F. A. Z.-Insti­tut).

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One in five com­pa­nies has been invol­ved in com­p­li­ance vio­la­ti­ons over the past two years. The con­s­i­de­ra­ble amo­unts of dama­ges are sobe­ring. Accor­ding to the empi­ri­cal sur­vey con­duc­ted in the first part of the study, which invol­ved 447 deci­sion-makers from large and medium-sized enter­pri­ses, 42% of the com­pa­nies invol­ved suf­fe­red damage of more than EUR 100,000, and almost half of them suf­fe­red damage of more than EUR 50,000 as a result of com­p­li­ance vio­la­ti­ons.

99% of the large com­pa­nies sur­veyed and 80% of medium-sized com­pa­nies iden­ti­fied com­p­li­ance risks as essen­tial. IT secu­rity and data pro­tec­tion remain among the top ten com­p­li­ance risks (94% and 95% respec­ti­vely). The com­p­li­ance risks iden­ti­fied in this area are being spur­red on by the Basic Data Pro­tec­tion Ordi­nance, which will go into force on 25 May 2018.

Con­s­i­de­ra­ble risk poten­tial is also attri­bu­ted to tax law: In the autumn of 2016, 82% of the com­pa­nies sur­veyed iden­ti­fied tax law as an important area of com­p­li­ance action; and the figure has now risen to 85% - the grea­test risks are still seen in the area of trans­fer pri­cing and value added tax. In parti­cu­lar, since the BMF's report of 23 May 2016 on Sec­tion 153 of the Ger­man Tax Code, com­pa­nies need to take imme­diate action. In that report, the tax aut­ho­ri­ties state that an inter­nal tax con­trol sys­tem can exo­ne­rate com­pa­nies from an accu­sa­tion of neg­li­gent tax eva­sion in indi­vi­dual cases.

And the pres­sure to act con­ti­nues to inc­rease, espe­cially in the inter­na­tio­nal arena: regis­te­red com­pa­nies can enjoy pro­ce­du­ral advan­ta­ges in connec­tion with the reform of the VAT Direc­tive if they have imp­le­men­ted a sys­tem. In addi­tion, with effect from 30 Sep­tem­ber 2017, a new Cri­mi­nal Finan­ces Act 2017 has ente­red into force in the Uni­ted King­dom, which can also have a sig­ni­fi­cant impact on Ger­man com­pa­nies. This impact can only be avo­i­ded if pre­ven­tive mea­su­res are imp­le­men­ted that essen­tially cor­res­pond to the basic ele­ments of a com­p­li­ance mana­ge­ment sys­tem in accor­dance with the spe­ci­fi­ca­ti­ons of the Ger­man Insti­tute of Pub­lic Acco­un­t­ants (IDW PS 980).

More than half of the large com­pa­nies already have a tax com­p­li­ance mana­ge­ment sys­tem in place; howe­ver, there is an urgent need to catch up in medium-sized com­pa­nies: only 6% have already imp­le­men­ted one. Howe­ver, once com­pa­nies have loo­ked into the mat­ter, the study shows that the urgency to take appro­priate com­p­li­ance mea­su­res is then recog­ni­zed. In practice, Ebner Stolz can assist affec­ted com­pa­nies with a spe­cially deve­lo­ped tax com­p­li­ance tool to iden­tify, weight and mini­mize risks in the tax area.

It is rather rare for SMEs to have their own com­p­li­ance depart­ments. Only 45% of the com­pa­nies sur­veyed in this seg­ment have one. As a result, SMEs gene­rally lag sig­ni­fi­cantly behind in the imp­le­men­ta­tion of com­p­li­ance mea­su­res. While around 91% of large com­pa­nies have already intro­du­ced com­p­li­ance gui­de­li­nes, only 66% of small and medium-sized com­pa­nies have a set of regu­la­ti­ons in place. 73% of the large com­pa­nies have intro­du­ced an enter­prise-wide com­p­li­ance mana­ge­ment sys­tem, com­pa­red with only 27% in the SME seg­ment. Small and medium-sized com­pa­nies often lack only one small step: often there are already effec­tive struc­tu­res on a small scale that can only be adap­ted, inte­g­ra­ted or upda­ted. More­o­ver, a com­pre­hen­sive com­p­li­ance mana­ge­ment sys­tem is not neces­sa­rily requi­red for every SME; appro­priate struc­tu­res in depart­ments with high risk poten­tial, such as the tax depart­ment or pro­cu­re­ment, may suf­fice.

Con­clu­sion

Com­p­li­ance pre­cau­ti­ons not only help to mini­mize risks; they also pro­vide effi­ci­ency advan­ta­ges in com­pa­nies - and help them to build a bet­ter repu­ta­tion.