Today’s issues:

• Tax Expert Joel Zernask – a new KPMG Partner
• Export survey by KPMG and Estonian Employers’ Confederation 
• New regulation for personal data processing 
• Fraud and precautions
• KPMG global survey: Time for changes 
• Estonia is among top three efficient users of EU funds
• Juta Saarevet has joined KPMG Advisory team

Tax Expert Joel Zernask will become a KPMG Partner

The KPMG CEE (KPMG in Central & Eastern Europe) Board has appointed Joel Zernask, the Head of Tax Services of KPMG in Estonia, to a CEE Partner as from 1 October 2016.

For about 15 years Mr Zernask has advised our Estonian and multinational clients on local as well as global tax issues. He is one of the most appreciated tax experts on M&A transactions and global tax planning. Working closely with specialists from KPMG’s Financial, Deal Advisory and Legal functions Joel can offer wide-ranging support in various business matters. Joel is an experienced speaker and commentator on tax related issues. He has actively contributed to several work-groups involved in tax legislative drafting and business development. 

KPMG CEE Senior Partner in Estonia is Andris Jegers, Partners are Eero Kaup and Indrek Alliksaar, and from 1 October also Joel Zernask.

For further information, please contact:

Joel Zernask

Head of Tax Services

Tel +372 626 8791

jzernask@kpmg.com

Export survey by KPMG and Estonian Employers’ Confederation

The majority of business decision makers in Estonia agree that our future prosperity and development depend on exports. However, despite a few success stories no big breakthrough has been made. As a rule, controlled development provides better results than going with the flow. On the other hand, too much intervention can destroy the value. Balancing on a razor’s edge is a complicated task where simplified approaches do not work. We need everyone’s contribution and brain potential to run the gauntlet of complexity.

This is why KPMG Baltics together with the Estonian Employers’ Confederation are carrying out a survey dedicated to exports the main purpose of which is to find creative ideas and innovative solutions to develop and expand Estonian exporting activities. 

We want to find out what entrepreneurs and business leaders consider as the factors that have enhanced or hindered exporting the most so far and under what conditions they could boost their export volumes. We gather opinions on what the role of entrepreneurs themselves and other parties (e.g. branch unions, parent organisations) in developing exports is and what could be done by the government. We would like to see what is considered to be the trigger of the Estonian export success story, both within and across sectors. 

First of all, we would like to collect business leaders’ opinions about what significant decisions across the Estonian economy should be made already now to increase the volumes of our exports both in the short and long run.

The survey involves about 50 major local exporting businesses who are also members of the Estonian Employers’ Confederation.

Survey results will be presented at the beginning of November.

For further information, please contact:

Hanno Lindpere

Head of Advisory Services

Tel +372 626 8708

hlindpere@kpmg.com

New regulation for personal data processing  

This spring the European Parliament and the Council adopted the General Data Protection Regulation (GDPR) which will replace the Data Protection Directive from 1995. The GDPR is binding in its entirety and directly applicable in all Member States and will become effective in a year and a half already, i.e. in May 2018.

The data protection reform aims to give citizens more control of their personal data in the current internet era, establish a regulation adapted for the digital commonwealth and create a uniform level of data protection across the EU. 

The GDPR is likely to have an extensive impact as the new principles apply to all EU businesses and organisations who process personal data as well as to the entities that are not established in the EU but are processing personal data of data subjects who are in the EU and whose processing activities are related to the offering of goods or services in the EU. 

Several updated principles set up in the GDPR can face businesses with the challenge of having to implement major changes to their current procedures and systems. New requirements apply to such areas as:

• an obligation to notify
• transfer of sets of personal data from one electronic processing system into another
• designation of a data protection officer
• documentation of personal data processing activities
• data protection impact assessment 

To ensure compliance with the EU regulations in the Member States wider powers will be granted to Member States' data protection authorities and heavy financial penalties will be established. 

Since the impact of the GDPR on businesses is extensive and fines for non-compliance are remarkable, personal data protection activities should be placed high on the list of priorities and preparations should be started now. Read more

For further information, please contact:

Sirli-Kristi Käpa 

Senior Associate, KPMG Law Firm in Estonia 

Tel +372 667 6805

sirli-kristi.kapa@kpmglegal.ee

Laura Saks

Senior Associate, KPMG Law Firm in Estonia 

Tel +372 667 6804

laura.saks@kpmglegal.ee

Teet Raidma

Head of IT Advisory Services

Tel +372 667 6814

traidma@kpmg.com

Fraud and precautions 

In recent years KPMG (internal) auditors and advisers have faced increasingly more fraud incidents in companies. In several such cases the company owners have withdrawn from day-to-day management, often living abroad; the company is headed by a local CEO given a free hand in managing the business; and the owners gain the whole information on their business only from the CEO or the staff entirely controlled by the CEO.

Based on their experience our internal audit professionals can advise you on how to reduce considerably the likelihood of unpleasant surprises and potential damage arising from fraud.

Some recommendations:

• Take an interest in what’s going on in your bank account.
• Have a regular check of the activities carried out in your company.
• Find a professional and reputable external auditor.
• Consider separating accounting from day-to-day management.

For further information, please contact:

Viljar Alnek

Head of Internal Audit Services

Tel +372 626 8751

valnek@kpmg.com

KPMG survey: Time for changes

One of the greatest paradoxes of the current economic environment is that although considerable investments are made in business management, training people and overall rise in management quality, poor quality of management is still being complained about. Why so?

A major task of management is to bring behavioural patterns followed in a company or organisation into line with the external environment. Being human, we are cautious and appreciate stability but evolutionary currents of economy force us to change. Therefore, the quality of management will always sort the wheat from the chaff.

The KPMG global survey Now or never. 2016 Global GEO Outlook is significant for the survey results prove that technological innovation has already reached or will shortly reach a decisive turning point which will divide market participants into losers and winners in the upcoming years. The fact is that already today even several Estonian businesses consider global tech giants like Google or Facebook as their biggest competitors

The key findings of the KPMG global survey speak volumes. Of 1,268 CEOs from companies across 11 leading industries in 10 countries all over the world surveyed, 41% (a third more than earlier) expect to be running significantly transformed companies in three years’ time. As many as 82% are even more robust in their judgment – they are concerned whether their company’s current products or services will even be relevant to customers three years from now.

According to the survey, although CEOs are concerned and the majority of them admit that they have no prior experience in addressing future changes, they still remain optimistic and believe they’re doing the right thing – 99% of the CEOs report taking action to develop talent. The following survey results are also quite eloquent.

Top five areas of investment over the next three years:

• Increasing data analysis capabilities 25%
• New product development 24%
• Cyber security solutions 22%
• Measurement and analysis of customer experience/needs 21%
• Geographic expansion within home country 20%

On the one hand, we may take a conservative approach to estimating the survey findings. Human nature and behaviour change extremely slowly, more likely taking generations. On the other hand, there must be some truth in Bill Gates’ legendary quote – so far, technology has really given rise to evolutionary rather than revolutionary changes, but the fact is that one moment quantity will turn into quality. 

The report is available here.

For further information, please contact:

Hanno Lindpere

Head of Advisory Services

Tel +372 626 8708

hlindpere@kpmg.com

Estonia is among top three efficient users of EU funds 

According to a survey carried out by KPMG, in Central and Eastern Europe the countries that used European Union funds most efficiently during the previous fiscal period 2007–2015 were Estonia, Lithuania and Slovenia. 

The effectiveness and efficiency of using the grants is determined by the gap between the allocated and paid grants, which at the end of 2015 was the narrowest in Lithuania (0%), Slovenia (2%), and Estonia (5%). The worst result was shown by Croatia (60%), which joined the EU only in 2013. In Estonia, 100% of the total amount of grants allocated by the EU was covered by contracts, and 95% was paid out.

The survey report is available here

For further information, please contact:

Juta Saarevet

Head of Public Sector Advisory Services

Tel +372 667 6819

jsaarevet@kpmg.com

Juta Saarevet took up the position of the head of the Public Sector Advisory Services practice at KPMG in Estonia in August 2016. Prior to joining KPMG she worked as the Director General at the Social Insurance Board.

Juta has an extensive experience in the public sector including heading and transforming a large organisation. In her previous positions Juta has considered it extremely important to contribute to the development of Estonia. According to Ms Saarevet, one of her major challenges in the position of the head of the Public Sector Advisory Services is to enhance and expand the activities of KPMG in Estonia as the adviser and partner of the public sector.

Read on about our Public Sector Advisory Services