Measures adopted by EU business ministers last week to slash red tape for micro-entities were slammed this week from two sides: MEPs said they did not go far enough, whilst accountants complained they were too far-reaching.
In measures to modify the Small Companies Act – adopted by the Competitiveness Council in Brussels last week – micro-businesses are defined by their turnover and balance sheets.
An earlier draft agreed upon with the European Parliament at first reading set the thresholds at €1,000,000 and €500,000 respectively, but after wrangling in the Council these were halved to €500,000 and €250,000.
This means many more companies will continue to lodge accounts. The original proposals were watered down at the instigation of a series of countries including Austria, Belgium, France and Luxembourg.
Parliament to oppose Council draft at second reading
German MEP Klaus Heiner Lehne (European People's Party), who steered the original proposals through the Parliament, told EURACTIV: "As long as there is a majority in the Parliament in favour of the original thresholds, Parliament will maintain its earlier stance at second reading, rejecting the Council's proposals."
Describing the agreement as "an unparalleled admission of defeat," he argued that "the finance ministers have successfully torpedoed the big promises made by their leaders to the smallest companies".
The European Small Business Alliance’s spokesman said his organisation "fully agrees with the views of rapporteur Klaus-Heiner Lehne and will support them once the issue returns for second reading in Parliament".
Accountants: Measures go too far
Meanwhile, accountants criticised the proposals for going too far. John Davies, head of business law at the Association of Chartered Certified Accountants, said that last-minute changes to the proposals meant that those companies exempt from filing longer accounts would also be exempt from including accruals on their annual books.
Accruals are expenditures not actually paid but for which an obligation may exist. Davies said: "The question is whether it is in the interests of the users of the accounts – whether these be shareholders, bankers and all those other interested parties in the wellbeing of companies – that accruals which are such a fundamental part of accounts should now be abandoned by this class of company."
The initiative to slash the reporting obligations of micro-entities is part of a broader aim to cut red tape pushed by the EU's High Level Group of Independent Stakeholders on Administrative Burdens.
The proposals would not be obligatory and member states would have the option of exempting such companies falling within the definition from accounting reporting obligations.