Bosses ignorant of enlargement impact, warns PwC report

Date: 12/12/02

By Peter Chapman

COMPANY bosses are blissfully unaware of the downside risks of EU enlargement on their businesses, international accounting giant PricewaterhouseCoopers has warned.

In a study of 100 executives in Belgium - where many EU firms have a major office - PwC found 85 were totally ignorant about changes to laws and tax rules that could affect their company's bottom lines.

Ine Lejeune, a taxation partner at the firm, said: "Before 1 May 2004, companies must be ready and know how to do business with, and in, the candidate member states in accordance with the rules imposed by the EU.

"If not, they will be taking major risks: once expansion is a fact, what is now legal in the countries in question will no longer be legal under EU and new national laws.

"Therefore, the CEOs of the companies concerned have every reason to make contingencies for the implementation of EU and national laws and gain insight into the new market opportunities that will be on offer."

Despite opening up big new markets, Lejeune said EU enlargement would mean firms would also have to comply with 80,000 pages of Union regulation that will become law in candidate countries.

A large number of sector-specific rules in those countries covering industries such as pharmaceuticals and financial services will be overhauled.

Joint ventures with local authorities or competitors would fall under the terms of strict EU competition rules, and may be punishable by law, she warned.

European businesses gaining from many lucrative tax breaks and subsidies - to be phased out when countries join the EU - will also lose out.

Lejeune added that changes in value added tax procedures could lead to "major costs if not catered for in good time".

Company bosses are blissfully unaware of the downside risks of EU enlargement on their businesses, international accounting giant PricewaterhouseCoopers has warned.