KPMG says that over 1,700 London-New York flights’ worth of CO2 could be saved if employees switched back to company cars.

The UK could save annual CO2 emissions equivalent of just over 1,700 Boeing 747/8 flights from London to New York - if all employees who have opted out of company car schemes chose to take advantage of ‘green’ tax breaks and opt back into their employer’s schemes.

According to KPMG’s Company Car team, since 1999 there has been a decline in the number of company cars, with HMRC figures indicating 400,000 employees having opted out in preference of purchasing their own vehicles. KPMG research** suggests that 52 per cent of employees who opt for cash instead of a company car use the money to purchase a second hand car, with emissions estimated at 30-40 plus grams per kilometre higher than the average company car driven by their colleagues.

If all 400,000 employees that have opted out opted back in, assuming they currently emit the national private car average of 191g/km**, driving a typical distance of 18,000** miles per annum and they drop to the average company car with emissions of 165g** on the same mileage the UK would save total annual CO2 emissions of 301,000 metric tonnes the equivalent to just over 1,700 Boeing 747/8 flights from London to New York.

Harvey Perkins, director within KPMG’s Company Car team commented:

“Changes made by the Government in 2002 to the company car tax rules were received with mixed reviews. For a minority driving relatively low business mileages in relatively high emissions vehicles, the changes had a negative financial impact and a number of people chose to opt out of the company car regime and buy their own cars instead. However, there is no doubt that the effect of the Government’s foresighted approach to use these rules to help employees make the right environmental choices has been to drive down CO2 emissions in company cars.

“Recently we have been seeing a change in mood with the number of company cars beginning to grow again. This seems to be driven by employees being more aware of the advantages of company cars both to the environment, and by extension their own pockets and, to some extent, employers’ concerns over the potential health and safety implications of their staff using privately owned vehicles for work purposes.”

A move towards consumers demanding greener vehicles is forecast to continue according to the 2008 annual global automotive survey by KPMG LLP in which senior global auto executives reported increased demand for vehicles using alternative fuel sources: 65 percent of respondents said this was important or extremely important to consumers, a significant increase on 53 percent in 2007.

Further changes to company car tax rules will come into force from April this year, and will allow for a much lower tax and national insurance charge in respect of vehicles that emit 120 grams of CO2 per kilometre or less. These ultra low emission vehicles allow employees to benefit from the lowest tax charges on company cars in a generation.

According to Harvey Perkins employers are looking to respond by improving their company car options. He said:

“Employers are keen to ensure their schemes offer employees the best options by featuring cars in the lowest emissions bracket. As manufacturers continue to strive towards delivering viable environmentally friendly alternatives, the financial and environmental benefits could be significant.”

The Australia-Japan tax treaty signed by Australian Foreign Minister, Stephen Smith, in Japan yesterday is a long overdue overhaul that will be a boon for businesses on both sides, according to KPMG Australia Tax partner, Rick Asquini.

“As Japan is a major source of foreign investment in Australia, the improvements in this new agreement around withholding taxes on dividends, interest and royalties will be a very positive step towards maintaining and attracting further investment. We will see more Japanese yen flow into Australia.

“Until now we’ve been operating under an agreement established nearly 40 years ago, business has changed dramatically over this time and this new treaty reflects the strength of the trading relationship.

“I would strongly encourage all Australian companies operating in Japan and Japanese companies here to review how they are financing their operations and assess their dividend and royalty arrangements immediately in light of these changes,” he said.

Mr Asquini said the energy and natural resources sector may face a shake up in light of the short timeframe in which Japanese companies may engage in the exploration of natural resources tax-free.

KPMG’s Transfer Pricing Partner, Anthony Seve said that Japanese companies in Australia would be relieved by the newly established time limit on transfer pricing reviews.

“In the past, there was no time limit on these reviews and that meant there was a high degree of uncertainty and administrative burden for many companies. Now that uncertainty has been removed, it will help Japanese companies to better manage their transfer pricing risk in a more practical and efficient manner,” said Mr Seve.

In addition, through the interpretative notes of the treaty, a clear intention is stated as to the application of OECD principles and methods to resolve Australia/Japan transfer pricing cases.

“It is hoped that this affirmation of approach between Australia and Japan will assist in resolving some difficult transfer pricing cases that are currently under examination,” said Mr Seve.

Britain’s fraud problem shows no sign of abating, with over GBP1bn of fraud coming to court in 2007 according to KPMG Forensic’s Fraud Barometer - the highest value since 1995 and the second highest in the 20 year history of the Barometer. The number of cases coming to court fell to 197 from 277 in 2006, but this remains a higher number than seen in any year prior to 2005.

With fears that the credit crunch will lead to a period of protracted economic slowdown, there is the potential that personal and corporate pressures may fuel fraudulent behaviour making the situation worse in 2008 rather than better, KPMG Forensic warns.

Hitesh Patel, partner at KPMG Forensic, said: “Levels of fraud continue to remain disturbingly high. Organised gangs have been more active than ever, with a proliferation in VAT frauds, ID thefts and other forms of white collar crime, to the tune of a huge GBP889m or nearly 90 percent of fraud by value. The sophistication of organised fraud in the UK is certainly extremely concerning. More fraud cases have been coming to court in recent years than previously, but one fears that this is just the tip of the iceberg. 2007 saw a respite in prosecutions for frauds against banks and other corporates, but now that the economy looks set to slow, we could see more people attempting frauds to ease their financial burdens. As companies tighten their belts in the harsher conditions and take a closer look at their operations and related expenditure, it is highly possible that a greater number of frauds may be detected.”

Gangs aggressively targeting the Government
Organised criminals accounted for nearly 90 percent of fraud by value in 2007 (GBP889m), with the Government agencies having been the primary target (GBP833m). This represents an enormous jump from 2006, when professional gangs accounted for GBP221m of fraud. Once again last year, carousel fraud on items such as mobile phones represented a substantial proportion of the value of organised fraud. It remains to be seen whether the reverse charging mechanism introduced by the Government last summer for domestic supplies of mobile phones and computer chips, combined with the continued success of their operational efforts, will have a material impact on the scale of carousel fraud cases, or whether gangs will simply move their focus to other goods.

ID theft continues to have an impact
Gangs have also aggressively exploited ID theft to perpetrate scams, making false benefit or tax credit claims. One husband and wife team claimed benefits for no fewer than eight adults and forty six children at a one bed flat in London, defrauding the public purse of over GBP1.1m. Other gangs targeted the transport system, organising large scale frauds on fake bus and tube passes.

Some criminal groups have become creative and brazen in the manner in which they steal and utilise ID’s. One gang stole homeowners’ identities by posing as would-be buyers, collecting enough details on the house to apply for title deeds from the Land Registry and then remortgaging the properties. A Midlands-based gang got away with some GBP500,000 in this way.

Another Surrey-based man simply took down details of passing cars and then approached car brokers claiming to be an agent working on behalf of a non-existent customer, and set up financing agreements with the money going into an account he controlled.

Banks and companies need to remain vigilant
Whereas the Government suffered heavily in 2007, financial institutions and other corporates enjoyed a fall in the value of frauds against them. GBP37m of fraud against banks came to court in 2007, substantially down from over GBP140m in 2006, while commercial business suffered GBP24m of fraud compared to GBP81m a year earlier. Nevertheless, particularly in the current economic climate, corporates need to remain extremely vigilant to the fraud threat.

Employees and management carried out roughly the same number of frauds (36 and 34 respectively), again down from 2006 (54 and 48). Once again though, management inflicted significantly more damage on their companies with their frauds totalling GBP54m, double the GBP27m that employees perpetrated.

Taking the rap
Other fraudsters were more creative in their efforts, such as the Northern Ireland man who routinely removed barcodes on items in a hardware superstore and replaced them with his own false barcodes so that he paid less then the items were worth. He then sold the goods on eBay and made an estimated profit of GBP100,000 before he was finally caught.

Another fraudster was brought to book because he could not resist recording his exploits in a hip-hop video. The rapper from London incorporated rhyming lyrics in his songs about his involvement in stealing scores of high performance cars and selling them under false identities. The scam was worth over GBP600,000.

Not just a London problem
While London and the South East was once again the dominant centre for fraud, with some 65 percent by value (GBP655m) and over 35 percent of the cases (77), other parts of the country also saw significant levels of activity. There was some GBP200m of fraud in the North West (30 cases) and GBP117m was recorded in the Midlands (31 cases).

Hitesh Patel concluded: “Given the developing economic conditions, companies and individuals need to be more alert than ever to the fraud threat. At a company level, they should bolster their routine monitoring and oversight processes with the use of data analytical tools to identify any unusual or suspicious trends. As individuals meanwhile, we all need to be vigilant and protect our personal data. The bottom line is that the cost of fraud goes beyond the financial. The emotional and social impacts are often forgotten.”

After calling the top of the M&A market six months ago, the latest version of KPMG’s Global M&A Predictor provides further evidence that M&A activity has now plateaued and is in decline in some areas.

The Predictor suggests that 2008 deal levels may just about hold steady compared to 2007 but deal values will fall away. However, with corporate balance sheets generally looking strong, the capacity for ‘intelligent’ deals to be struck does still remain.

The latest Predictor - a forward looking index of 1,000 leading companies’ net debt to EBITDA ratios and Price Earnings ratios shows that global forward PE ratios have now dropped from 17.1x to 17.0x; confirming the plateau period which KPMG expects to characterise M&A activity in 2008..-

Stephen Barrett, International Chairman of Corporate Finance at KPMG, commented: “There was no satisfaction in accurately forecasting the top of the market six months ago. However, if there is some consolation to be taken, it is in the fact that also as predicted - any slowdown will be a fairly gentle, gradual one. There are definite winners and losers though; look closely and you see that the forward PE ratios are down 0.7 and 0.5 in Europe and the US respectively. It is mainly the AsPac region where forward ratios moved forward strongly from 17.0 to 19.0 which is bolstering the overall numbers. This leaves us with a real mixed outlook. Where there is appetite and confidence, there are constraints such as a lack of funds or suitable targets. Where there is cash, there is nervousness, caution and a slight loss of appetite”

Michael Wareing, Chief Executive of KPMG International, has been appointed as Commissioner within the new Basra Development Commission. The BDC will be a high-level, over-arching body which will bring national, regional and international business knowledge together to advise on investment and growth for the province. Its strategy is to develop a plan for economic development involving both the public and private sectors, and regional and international stakeholders.

Michael Wareing said:

“I am delighted to accept this new position heading-up international input to the Basra Development Commission. There are enormous opportunities for business and enterprise, and as Commissioner I am excited by the prospect of helping to achieve economic growth which will benefit not only the people of Basra and Southern Iraq, but also the entire region.”

The Deputy Prime Minister of Iraq, Barham Saleh, said:

“The Basra Development Commission will bring together business leaders from across Basra, Iraq and the international community to help stimulate growth in Basra. I am happy that Michael Wareing will take up his role as one of the international advisers on the Commission and help Basra reach its full potential as Iraq’s economic gateway.”

Douglas Alexander MP, U.K. Secretary of State for International Development, said:

“With the provisional development strategy now in place, the foundations have been laid for even greater economic progress in Basra, using regional, national and international expertise. I welcome the news that Michael Wareing has agreed to join the Commission to help expand the economic opportunities that exist in Basra and to provide support as it enters a new phased of its development.”
Mike Wareing is Chief Executive Officer of KPMG International. Mike was previously Chief Executive of KPMG’s Europe, Middle East, Africa and South Asia region, a position he held since 2002.

Mike joined KPMG in 1973 and was articled as an accountant in Birmingham. He rose to Deputy Senior Partner in Birmingham, and has also held a number of senior national positions for the UK firm. He has been the lead partner for a number of KPMG’s major clients.

Mike has been closely involved in work for a number of U.K. charities and public bodies. He is currently a Board member of Business Action on Homelessness and joint Chairman of Project Compass which aims to help homeless ex-Armed Services personnel return to full time work. He has recently been appointed as Chairman of the Global Partner Network, which is lead by Business in the Community and which seeks to bring together NGOs charities and companies in the Corporate Social Responsibility area globally.