Rankings report – NORDICS
Nordics GDP increases as pandemic restrictions lift
The Nordic regions have bounced back strong from the pandemic. With borders reopening, it has been business as usual for accountancy firms, with short term revenues boosted by helping businesses audit their Covid compensation packages and by regulatory changes being brought in by Norway and Denmark. Che Golden reports
his increase in demand has led to a staff shortage, with many firms struggling to find people qualified to do the work. But there has also been a shift in thinking amongst younger professionals that is affecting staff retention. Many are now demanding a better work and life balance and are avoiding the larger, more profit driven firms as a result. Many are also avoiding the larger cities, as a reaction to the pandemic, seeking to work either closer to home or simply to have the choice to avoid crowded spaces.
The easing of restrictions has improved the GDP growth outlook in the Nordic economies. According to SEB (Skandinaviska Enskilda Banken), the economic recovery has regained momentum in Norway, with GDP set to grow by 2.7% this year and 3.7% in 2022.
In Denmark, a fast reopening of the economy has led to an acceleration in growth. SEB has raised its GDP growth estimate for this year to 3.6 %, while lowering its 2022 forecast to 4.1%. A strong currency has forced Danmarks Nationalbank to intervene in the foreign exchange (FX) market, and SEB predicts the bank will probably have to cut its key interest rate next year. Finland experienced a recession in 2020 that was among the most moderate in the euro area, and the same will be true of its recovery. GDP will grow by 3.2% this year and 3. % in 2022.
Norway has been overhauling its tax regulations to bring them more into line with EU regulations, including the new Auditors Act (Lov om revisjon og revisorer), which was implemented on the 1st of January. Most of the special Norwegian requirements have been removed, and the legal rules are now mainly in line with EU rules and regulations.
The Norwegian tax administration is also modernising its VAT systems, a process that started in 2019 and is planned to be finished by the end of 2023. The key modernisation points are: increasing compliance with the rules for taxes and duties; reducing the extent of the ‘hidden’ economy; and making it easier for business in duties regarding VAT.
The new digital VAT return will be launched and ready for use from 1 January 2022. From this date, VAT returns will have to be submitted in the new format. The new VAT return will re-use the Standard Tax Codes from the SAF-T Standard. The Norwegian tax administration is hoping it will be easier to supply correct information when using the digital VAT return since it will be possible to apply remarks by using attachments both per line and at the end of the form. The new VAT return will cover more cases and remove the need for remarks. For common cases, structured remarks will be made. It will be possible to attach up to 50 files of a maximum of 25 MB per file per VAT return.
The administration is also working on a new methodology for reporting on sales and purchases. It believes that such reporting on sales and purchases will help both businesses and the Tax Administration to ensure equal treatment and prevent unlawful distortion of competition for businesses.
The proposal will require changes in legislative acts and regulations, and the Ministry of Finance is currently reviewing the Tax Administration’s proposal.
All these changes have been keeping Norwegian accountants busy.
"Overall, the health of the industry is good," says Joachim Trana, partner at Revisjon AS, a Crowe member firm. "The customer demand is there, and we have more clients coming to us than leaving us. But it has been a challenge to find staff with the right requirements."
During the pandemic, the Norwegian government issued several compensation packages and they had to be certified by an auditor, so there has been a big demand for this the last year. Trana says there is also an increasing demand for due diligences.
Joachim Trana, partner, Revisjon AS, a Crowe member firm
"From July this year, the Norwegian Accounting Act was updated, and some of the changes will have an effect on the annual accounts for 2021 (that we will perform audits on in 2022)," says Trana. "For example, that small companies will have fewer requirements with regards to the notes to the annual account.
"The new VAT-reporting is more detailed than the earlier report, and is based on the VAT-codes implemented in the SAF-T Financial system," he continued. "Most people (wage earners and pensioners) have had the new tax return for a year or two, but next year the Tax Authorities will launch the pilot project for implementing the new tax return for companies as well. In this first round only companies without an auditor will participate, but from 2023/2024 all companies will have to use the new tax return. We expect that all of the developments mentioned above will result in more questions and demand from our clients."
Customer demand has increased considerably during the last 12 months, according to Ding Xu, partner, at Ecovis Ardur Tax in Norway. " I did not experience an obvious fee change but the clients have been more cautious when it comes to spending," he says. "It has also been difficult to recruit qualified employees in Oslo where our office is located. This is partly due to many people has moved out of Oslo in the pandemic."
Ardur Tax specialises in providing accounting, tax, payroll, legal and mobility services to cross-border clients. The demand for all its service lines has grown after Norway reopened the border. In the coming year Xu will be keeping an eye on green energy industries for future growth for the firm. "Sectors such as carbon capture and ocean wind will keep expanding and it is interesting to see how this develops and how we can support them," he says.
Ding Xu, partner, Ecovis Ardur Tax
In Denmark, there have been ongoing changes to the financial act as a result of a review that established that some provisions of the directive have not been implemented correctly in the Annual Accounts Act, or that the requirements have been implemented in an inappropriate manner. The amendments to the law ensure that the new international accounting standards, IFRS 15 on revenue from contracts with customers, IFRS 16 on leasing and certain parts of IFRS 9 on financial instruments can be used to fill the framework of the law to the extent that the standards do not conflict the wording of the law. Currently, the accounting industry is waiting on an upcoming larger amendment to the DFSA, which makes it even more compliant with IFRS.
"We have lots to do in the accounting industry. Financial aid packages under Covid have resulted in many extra tasks for our clients," says Martin Therkelsen, international partner at Revisionshuset Tal & Tanker, a Morison Global firm. "Many of the packages have been accompanied by a statement. Also, a lot of clients are in good economic shape and demand our advisory assistance on many areas.
We also see a number of clients having outsourced bookkeeping, payroll service etc. Because of a high demand we did not experience a fee pressure."
Martin Therkelsen, international partner, Revisionshuset Tal & Tanker, a Morison Global firm
In Denmark, as in so many other territories, the big problem post-Covid has been staff retention. "The young auditors want work-life-balance, which is hard for them to find in the profit optimised big audit companies," says Per Jensen, international partner with Revisionshuset Tal & Tanker. "Many auditors have left the industry seeking new career opportunities as CFO, controller etc. I believe this will result in difficulties regarding recruiting staff in years to come."
Revisionshuset Tal and Tanker has been expanding as it has seen increased demand for financial and strategic counselling, bookkeeping, payroll service. While merger and acquisition activity has been quiet in Denmark of late, Jensen feel that could change soon. "I believe a lot of smaller audit/accounting companies with old registered auditors (lower grade than State Authorised Public Accountants) are ready for a generational change and takeover/merge with bigger companies," he says.
Per Jensen, international partner, Revisionshuset Tal & Tanker
Sweden has been lucky enough to experience very little disruption in the last year, according to Lars Engström, managing partner at Tönnervik Revision, a Crowe member firm. The regulatory environment has been largely undisturbed and growth has not been hampered too much by the pandemic.
"We have experienced a continued good demand for our services and have in conjunction with that handled the usual challenges concerning recruitment of experienced personnel to help us continue on our growth path," says Engstrom.
Lars Engström, managing partner,Tönnervik Revision, a Crowe member firm
Tönnervik Revision has experienced a steady increase in demand for its accounting, tax, assurance and advisory services – so much so that it has been engaged in a large number of acquisitions during the year. Apart from the usual consolidation and deconsolidation of various firms, Engstrom has noticed that a couple of the larger audit and accounting firms have spun off their accounting departments during the last few years.