Source: Fédération des Experts Comptables Européens (as found in Panorama of EU Industry 1997, p. 25/28).

As leading providers of professional business services, the internationalisation of accountancy firms has mirrored that of the clients they serve. Examples of the types of international transactions which could take place include the following, where it is assumed that country A exports and country B imports.

1. Production is wholly in country A, by residents of country A. Consumption is wholly in country B, by residents of country B. The vehicle of trade is communications. Both information and payments cross frontiers.

Examples:

Referred audit work, whereby a parent company in country B retains an auditor in country A to audit a subsidiary of the parent company in country A, for the purposes of reporting back to the parent.

International consultancy work, whereby a client in country B seeks the advice of a consultant in country A.

Computer software, whereby a program is developed in country A, but exported for use in country B.

2. Production is principally in country A, by residents of country A. Consumption is in country A, by residents in country B. Both consumers and payments cross frontiers.

Examples:

Training courses, for either staff or clients.

International consultancy work, whereby a client in country B visits a consultant in country A to receive advice.

3. Production is by residents of country A. Consumption is by residents of country B. Production and consumption take place in delocalised fashion. Payments cross frontiers.

Example:

Long-term training programmes, software development projects or consultancy assignments, whereby there is a large element of travelling backwards and forwards between countries A and B by both the producers and the consumers.

4. Production is conjointly by residents of more than one country, and consumption is by residents of one country. Payments might or might not cross frontiers and part of the production does.

Example:

Major consultancy assignments carried out by international firms or networks of firms, whereby specialists drawn from several different countries are brought together to form a single project team.

5. Production is by residents of country A, partly during their temporary presence in country B. Consumption is in country B by residents of country B. Payments and the producer's personnel cross frontiers.

Example:

This is a very common form of international trade in accountancy services, and can apply to any of the services provided by accountants.

6. Production is partly in country A and partly in country B through some form of permanent commercial presence. Consumption is in country B by residents of country B. Payments cross frontiers.

Example:

Specialist consultancy assignments, whereby services provided by country A producers are supplied with the assistance of an affiliated firm or other form of representative office in country B.

7. Production is partly in country A, but mostly in country B through a form of permanent presence other than a subsidiary. Consumption is in country B by residents of country B. Payment for services does not cross frontiers, although profits from them do.

Example: -

Any form of accountancy service, involving the use of the producer in country B of information, technology or know-how provided free of charge by a producer in country A, but where the two producers are linked together in a profit-sharing partnership, joint venture or some similar arrangement.

8. Production is partly in country A, but mostly in country B, facilitated by the presence in country B of the producer's employees from country A. Payments cross frontiers.

Example:

This method of trade differs only from that described in 5 above in respect of the amount of production carried out in country A, and therefore can apply to any of the services provided by accountants.

9. Production is wholly in country B by a producer normally resident in country A. Consumption is in country B, by residents of country B. Only the producer, but no payments for the service cross frontiers, although the producer might use his earnings to make transfers to country A..

Example:

This form of trade applies to accountants who live in one country, but who commute to another where they have their practices. It can therefore cover all forms of accountancy services.

10. Production is by a subsidiary of a producer from country A, located in country B. Consumption is in country B, by residents of country B. Capital crosses the frontier, but before the transaction takes place. Payments for the service do not cross the frontier, but the subsidiary's earnings might be remitted as income to country A.

Example:

This situation is analogous to that in 7 above, except the relationship is a parent - subsidiary one. It can cover all forms of accountancy services.

11. Production by a producer in country B is accompanied by the purchase of know-how from a producer in country A. Consumption is in country B by residents of country B. Payments for the service do not cross the frontier, but the know-how and payments for it do.

Example:

This arrangement, or variations on it, form the basis for most international firms or networks of accountants. Locally owned firms contribute towards centralised expenditure on research, development, training and other such costs, and in return have access to the results of this work. Most agreements also provide for adherence to common standards, the use of a common firm name and for the referral of all work between members of the network only. The degree of integration of ownership and management within the networks can vary, with some being relatively loose groupings and other having a profit sharing and common management arrangement.

12. A producer receives his education, training and professional qualification in country A, and then moves to country B, where he takes up residence and provides the same range of services to consumers in country B as he did in country A. Payments for the services do not cross frontiers, although the producer may wish to bring his retained earnings with him should be subsequently choose to leave country B.

Example:

This situation relates to the emigration or long-term expatriation of qualified accountants, and thus covers all forms of accountancy services.

Source: S/WPPS/W/2, pp. 33-35.

Table 4:

A. General impediments

• Restrictions on international payments
  
  Countries can prohibit or ration different categories of international payments, both inward and outward, or oblige the conversion to or from foreign currencies at disadvantageous exchange rates. Different rules may apply to capital transfers, repatriation of profits, payments for current transactions and so forth. As a consequence, the cross-border provision of services, personnel and know-how is discouraged or prohibited, as is investment in a permanent presence or cost- and/or profit-sharing with a local affiliate.
  
  

• Restrictions on the mobility of personnel
  
  Visa, work-permit and immigration provisions may prohibit or restrict the ability to move persons with specific skills to the location where they could be deployed most effectively. This may apply to both short-term and long-term stays, and to management or specialist staff. In many cases, such mobility is necessary to serve clients directly, transfer know-how or manage a foreign permanent presence, so the inability to do so is a severe impediment.
  
  

• Impediments to technology and information transfer
  
  As much accountancy firm know-how is proprietary, and is frequently materialized in documentary or software form, firms may be reluctant to transfer such know-how to jurisdictions without adequate copyright and other intellectual property protection provisions. Restrictions on information transfer, which often arise from data protection and personal privacy provisions, may require processing of information to take place locally, even when it could be done more efficiently elsewhere. Some countries even prohibit the removal of audit and other working papers from their national jurisdiction, which constitutes an obligation to establish a permanent presence, even when cross-border activity may be the preferred means of service delivery.
  
  

• "Buy National" public procurement practices
  
  Many national and sub-national governmental authorities and public sector organizations purchase goods and services from local providers only. In some cases, local branches, subsidiaries or affiliates of foreign firms are not eligible for public procurement purchases. As a minimum, this excludes cross-border provision of services and requires a local permanent presence, but it may further exclude a foreign provider totally from a significant market, irrespective of the mode of delivery chosen.
  
  

• Differential taxation treatment/double taxation
  
  Explicitly and intentionally discriminatory taxation provisions may disadvantage foreign or foreign-associated services providers in favour of local competitors, and the absence of sufficient relief may lead to double taxation in different jurisdictions of the same revenues, profits or interest and royalty payments.
  
  

• Monopolies
  
  Where certain services are provided by a single monopoly, access to that market is not possible by foreign providers.
  
  

• Subsidies
  
  Governments may award selective or for-nationals-only subsidies, which place foreign services providers at an insurmountable or substantial disadvantage

B. Specific impediments

• Nationality requirements
  
  Many accountancy services are regulated in different jurisdictions in a manner whereby only certain authorized persons may provide them. Where nationality requirements must be met, foreigners are thereby excluded.
  
  

• Residence/establishment requirements
  
  Although less restrictive than a nationality requirement, the obligation to be established or resident in the jurisdiction where the service is provided excludes the possibility of serving a market on a cross-border basis.
  
  

• Professional certification/entry requirements
  
  Even in the absence of associated nationality and/or residence/establishment requirements, the obligation to hold a specific authorization to provide certain services, although in itself justifiable, can operate in a manner which discriminates, de facto, against foreign services providers who in fact possess all or most of the competence and ability required. Permission to sit the relevant examinations may not be available when desired, it may be subject to unreasonable prior conditions, or inadequate or no credit may be given for the competence and experience evidenced by the possession of foreign academic or professional qualifications.
  
  

• Compartmentalization/scope of practice limitations/incompatibilities
  
  Because of differences in regulatory approach between countries, an accountant or accountancy firm may not be able to provide in other jurisdictions the entire range of services they provide in their home country. Non-regulated services in one country may be regulated in another, requiring compliance with additional regulatory burdens. Services provided by accountants in one country may be reserved to other professions in other countries. Certain combinations of services, either in general or in the case of specific clients, may be prohibited in some jurisdictions yet permitted in others. A uniform service range may often not be offered across several markets as a result, and firms from narrow-scope countries may find themselves at a disadvantage in broad-scope markets and against broad-scope competitors.
  
  

• Restrictions on advertising, solicitation and fee-setting
  
  When seeking to enter new markets, foreign service providers may consider themselves handicapped if they cannot advertise and otherwise attract new clients, or if they are prohibited from competing on the basis of price.
  
  

• Quantitative restrictions on the provision of services
  
  Some countries place limitations on the volume of services which may be provided by professional firms, usually by reference to the number of partners or professional staff in the firm. Arguments of quality control are used to justify such restrictions, but they may unreasonably penalize firms which, by virtue of superior organization or methodology, may in fact be capable of providing quality services in a higher volume than foreseen by the regulations.
  
  

• Differences in accounting, auditing and other standards
  
  These differences impede the transfer of personnel and know-how, and lead to services "produced" in one jurisdiction not being accepted for "consumption" in another, e.g. financial statements and audit reports for regulatory purposes.
  
  

• Restrictions on business structures
  
  Accountants are frequently constrained as to the business structures through which they provide their services. Unlike other businesses, they may be prohibited from using certain legal forms and, even when permitted to use certain types of legal entities, they may be subject to special restrictions, e.g. number of partners, unlimited liability in certain or all circumstances, ownership, management, control, etc. This can have negative implications with respect to size, management structure, risk management and diversification, the raising of external capital, transferability of ownership, taxation, multidisciplinary practice, the ability to acquire or be acquired by other firms, etc.
  
  

• Restrictions on international relationships/use of firm name
  
  In some jurisdictions, firms are not permitted to call themselves by the name of the international network with which they are associated. This can prevent the operation of the reputation effect and restrict the firm's marketing capacity. Some countries explicitly prevent relationships between local firms and international networks. In most countries, all or a majority of the ownership, management and control of a firm must be in the hands of nationals or locally qualified professionals, which prevents foreign firms from having branches or subsidiaries in that country.

Source: S/WPPS/W/2. pp. 20-22.

The following table indicates for each of the three sub-sectors of the accountancy sector, i.e. accounting, auditing and bookkeeping, the countries which have scheduled a specific commitment.