that this should be done by cooperation between national stock exchange regulators,
rather than through any EU-wide regulator. The Committee of European Securities
Regulators (CESR) has been set up for this purpose.
An FEE discussion paper on enforcement of IFRS within Europe reviews the sit-
uation. It says that “ideally global standards require global enforcement” but comes
to the conclusion that “a single enforcement system, even at a European level, is an
unrealistic goal at present.” Enforcement systems throughout the EU differ widely.
Only two countries, Italy and France, have SEC-style stock exchange surveillance
agencies. The U.K. system, although considerably reformed in recent years, does not
have any mechanism for systematic checking by the oversight authorities that ac-
counting standards are followed. It does have the Financial Reporting Review Panel,
but this body, while effective in what it does, examines only those financial reports
that outsiders refer to it. Most European countries simply rely on the statutory audi-
tors to ensure that the appropriate accounting principles are complied with.
FEE’s recommendations are that all member states review their enforcement pro-
cedures and, in view of the short period before IFRSs come into force, those without
any enforcement system adopt the review panel model as providing the least costly
immediate solution. At the same time the accountants’ regional body believes that it
is essential to create a coordination unit for enforcement bodies. Common procedures
need to be worked out and arrangements made for close consultation with the IASB
and the International Financial Reporting Interpretations Committee to deal with
emerging issues and implementation issues.
17.6 TAXATION. If resistance to change is fairly strong within national audit bod-
ies, this is nothing to the governmental resistance to any change in taxation, and
therefore to any harmonization of taxation. Nonetheless, different taxation remains a
major factor in business decisions, and for that matter impacts on accounting meas-
urements, partly through the distorting affect of tax concessions and partly through
the fact that taxes are levied in different ways. For example, in many EU countries,
if depreciation is to be claimed as a deduction against revenues, it must appear in the
accounts for the amount claimed. Where the tax authorities will accept accelerated
rates, this means that the companies must apply these, thereby in countries like Italy,
France, and Germany reporting higher depreciation on new assets than in countries
like the Netherlands and the United Kingdom.
There are also structural differences, with a wide range of different taxes. One
comparative study noted that France had as many as 76 different taxes, while at the
other end of the spectrum Spain had only 19. Some differences have a major impact
on accounting measurements. France, for example, funds its social security system
(health and unemployment) exclusively from payroll taxes, while the United King-
dom does not link the source of tax to the spending budget. France has significantly
higher payroll taxes, which appear as part of personnel cost, while the U.K. equiva-
lent makes apparently higher profits but pays more income tax.
The Commission has reviewed taxation a number of times, the most recently in
1992 in the Ruding Report. This took the view that steps should be made to harmo-
nize taxes because of the distorting effect on the single market, but so far very little
has been done. In 1998, Austria and Germany manifested a political will to do some-
thing to resolve the complex patchwork of different taxes throughout Europe, but the
task is very difficult and appears to have run into the sand. Aside from the fact that
the existing framework is built up of compromises between different interests and ob-
17 • 14 EUROPEAN HARMONIZATION