Author: Ben Debski

If you’re one of those people who does not leave the house without showering and applying deodorant, you may be surprised to learn that hundreds of millions of people around the world likely think that you’re unclean, if not downright disgusting.

It’s all about how you clean your butt.

In cultures that use water to clean down there after defecating, dry toilet paper as a substitute is something of an ass abomination. Yet to those of us raised on Charmin, using a bidet, even though it’s more hygienic, is just as foreign.

Bathroom hygiene is just one of the foul and frankly fascinating aspects of what’s euphemistically known as “sanitation,” which British journalist Rose George explores in her new book, “The Big Necessity: The Unmentionable World of Human Waste and Why It Matters.”

For her reporting, George ventured into the bowels of London’s sewer system with an emergency breathing apparatus strapped on her waist. She squatted in a doorless public toilet in China. And she visited slum dwellers in Mumbai who live in areas with 100 public toilets for 45,000 residents.

Here in the industrialized world, where we happily flush it and forget it, it’s hard to imagine that literally billions of people elsewhere have no access to a toilet. It may also be difficult to believe that 90 percent of the world’s sewage ends up untreated in oceans, rivers and lakes, some of that filth burbling out of our supposedly sophisticated sewage systems. While the humble toilet has added decades to the lives of those of us lucky enough to have one, George reports, it’s also created a whole host of environmental problems.

We talked toilet, latrine and bidet with George by phone from London.

Some 2.6 billion people have no access to a toilet whatsoever, and that includes a latrine, a bucket or a box. They literally have nowhere to go. Can you talk about what that means?

Anyone who has traveled to India and taken an early morning train will know exactly what that means because all you have to do is look out of the window. What you’ll see is people just simply squatting there, doing their business where they can.

What it means in terms of public health is catastrophic. Human waste can be extremely toxic. It can carry millions of bacteria, viruses and worms. And you don’t want that kind of stuff lying around. But these 2.6 billion people, who have absolutely no sanitation, have no choice but to use the nearest bush or roadside. That means it’s being tramped around in the human environment. It’s getting into people’s food, it’s getting into their water, and it’s making them extremely sick.

The death toll from diarrhea, which is largely caused by poor sanitation, is astronomical. It’s the second biggest killer of children in the world after respiratory diseases.

Why isn’t this more of an international health issue?

It’s quite simply that we don’t want to talk about it. There is a linguistic problem. We don’t have the language for it anymore because we’ve resorted to euphemism. In the West, we’ve been able to resort to euphemism because we have the wonderful flush toilet and waterborne sewage system, which gives us the luxury of being able to flush something away and assume it will be treated elsewhere.

We literally flush it out of our mind as well, and it’s not in public discourse anymore. This wasn’t always the case. Three hundred years ago it was considered an honor to attend kings when they were seated on their toilets. People in the West have this great system and I think they just assume that it’s the same for everybody in the world.

Is there a celebrity out there who wants to be the Angelina Jolie of toilets, making this a popular issue?

Matt Damon has started to talk about school latrines, which is great news. It’s inevitable because he does a lot of great work on clean water. For example, if you go to a school in a village in Africa, you’ve got a nice clear water supply, and you’ve got the nice tap, but you’ve got no latrines. So obviously the kids are going to be contaminating the water supply because they simply have no sanitation. You’ve got to make the connection. You can’t have clean water without decent sanitation.

You found in your research there’s no single solution. Why not?

The answer is not that everybody should have a sewer or everyone should have a toilet. That is simply impractical, and most countries can’t afford it. Culturally, in sanitation, we’re very different around the world. People have different attitudes to hygiene and toilets. Some countries are fecal-phobic and some countries are not. China is quite at home with excrement, and uses it as fertilizer, whereas Indians are not. They’re quite averse to any use of human waste.

In Benin, Africa, some very interesting research was done into what would make people buy a latrine. Mothers, who didn’t have a latrine, could see that their kids were getting sick every week with diarrhea. They were spending money on medicine, and their kids weren’t going to school, but they still wouldn’t buy a latrine.

An academic named Mimi Jenkins discovered that the biggest incentive for someone to buy a latrine in Benin was to feel royal, because the royal family had one. It was a question of pride and status, it wasn’t about health. Health messages never work, because nobody wants to be nagged, even when they’ve got the evidence in front of them.

So telling people, “This is where the cholera is coming from,” doesn’t have as much impact as appealing to their pride?

Exactly. It’s what I call the “doctors who smoke” understanding of people. Doctors who smoke know it’s bad for them, yet they still do it. What a lot of sanitation activists are saying is that we have to make people want toilets. It has to be something they aspire to and desire.

Isn’t part of that incentive making defecating in the outdoors unappealing?

Yeah, and there’s a very interesting movement going on in many developing countries, including India, Cambodia and Bangladesh, called Community Led Total Sanitation. It appeals to people’s sense of disgust.

A few visitors will go to a village, and the villagers will want to show off their village to the guests. They’ll take them around the village, and then at the end of the tour, the visitors will say, “Well, yes, that’s nice, but can we see your open defecation grounds?”

Because they’re polite, the villagers will take them there. The technique is to make people stand there and confront it, to not be able to turn away from the fact that they’re shitting in the open, and that their kids are tramping it back into the village, and that they’re all eating it. Someone calculated that people in villages who are doing open defecation are probably ingesting 10 grams of shit a day. That’s pretty disgusting.

People will run off and dig latrines. Once the whole village is cleaned up, nobody will want to be the dirty person in the village. And once the village is cleaned up, the clean village will be in competition with the next village, and that village will want to clean up. It’s a chain reaction.

Don’t some governments pay for latrines, and the people don’t always use them?

Yes. For 20 or 30 years, India has been pouring money into sanitation, and has been building, or subsidizing, lots of extremely nice latrines all over the country. But because they’re nicer than people’s houses, they get turned into a temple, or an extra room, or a goat shed, or simply used for storage. Because people have this engrained habit of going out into the bush, they don’t see anything wrong with it.

Well, if you’re used to going outside, maybe it’s kind of gross to go inside, in a bathroom, or even near your home.

That is a problem, and that’s what makes sanitation very tricky. In India, it is considered unclean to have a latrine close to the home. The answer is to make sure that it is a decent latrine, and it doesn’t smell. It has to be an adequate latrine, it has to have some kind of fly-proofing, and some kind of vent pipe so there is no odor. If it’s a decent enough place, then people get used to it.

Let’s talk about some of the slums you visited where there are 100 toilets for 45,000 people. What happens then? People don’t end up using the toilet, right?

They use it if they can. But if it takes half an hour to get from one side of the slum to the other, or you’re waiting in line and the doors are falling off, and it’s unpleasant, then people won’t use it. They just go in the street, or on the roadside, or they find the nearest beach. There are beaches in Mumbai that are absolutely filthy.

What are flying toilets or helicopter toilets?

A flying toilet is a plastic bag. You defecate into the plastic bag, you wrap the plastic back up, and you throw it. Hence it’s a helicopter or flying toilet. This is the only form of sanitation available to a lot of slum residents in Africa, particularly in Kenya and Tanzania. At least it’s potentially containing the toxic human excrement, but obviously it’s not ideal, and they’re all over the place in the slums. It’s quite a nice phrase for an extremely unpleasant practice.

Isn’t it true that your own shit isn’t a danger to you, it’s other people’s?

If you wanted to, you could probably ingest your own shit, but it wouldn’t necessarily be toxic. But the problem is that shit is such a good vehicle for disease transmission. That’s why we in the West have such good sewer systems and waterborne waste treatment. In about 1850 or so in London, a doctor called John Snow realized that cholera was being carried in drinking water, and it was being carried in human shit.

By some accounts, the toilet has added 20 years to the modern lifespan, so this thing that we won’t even discuss is actually responsible for perhaps decades of all of our lives.

Yes, exactly. Last year, the readers of the British Medical Journal voted sanitation the biggest medical advance in the past 200 years. It is an amazing thing — the toilet. We do live longer because of the toilet. Before sewers and toilets became popular in the 19th century, one in two children in London died before their 5th birthday. There was an enormous mortality rate, and that dropped dramatically, especially when soap and hand washing also became popular. We should be on our knees before the toilet.

We should worship at it.

We should worship the toilet. It’s been an enormous medical advance. It’s been fantastic, so I think that we should give it its due.

Even in industrialized nations, where we have sewer systems, our bathroom habits vary widely. For instance, there are two main ways of cleaning your butt. Can you talk about what those are, and who does what?

The world divides into water cultures and paper cultures. This comes into quite stark relief in Japan because Japan used to be a paper culture. Two hundred years ago they used sticks or stones or paper. And now, because Japan has had a toilet revolution, they’ve turned into a water culture, and they have very high-tech toilets with in-built bidets and drying systems that can massage you and probably sing to you.

But the U.S. and the U.K. stubbornly remain paper cultures, and attempts to introduce bidet toilets have failed. Hygienically, bidet toilets are infinitely superior. Using toilet paper to clean yourself down there makes about as much hygienic sense as cleaning yourself with a towel and imagining you’re rubbing off the dirt. We’ve got a very unhygienic way of cleaning a place of our body that we would like to be very clean.

Actually, we’re pretty disgusting, and we just don’t realize it.

We are kind of disgusting. I’m being polite about it. In water cultures like India, where you see all these people going to do their business with a little cup of water, they think we’re extremely dirty. They can’t believe it. Muslims, who have to be scrupulously clean according to the laws of the Quran, also think it’s kind of weird that we have this habit of using paper, and imagining we’re clean. We’re not.

Can you talk about the attempt of the Japanese company Toto to bring bidet toilets to Americans?

In Japan, Toto is an enormous company, and it’s one of the great names of Japanese industry, like Sony or Mitsubishi. More households have a Washlet toilet, which is a bidet toilet, than have a computer. They’ve had astonishing success in Japan, so quite reasonably they thought, “If we can do it in Japan then we can do it everywhere else,” because Japan was also a paper culture.

So Toto USA started about 20 years ago and they’ve been trying to introduce the high-tech or high-function toilet over here. Americans really aren’t that interested. The Neorest, which is this stunningly gorgeous toilet, the top-range Toto toilet, has been installed in various places, including one large casino hotel in Las Vegas. It’s apparently popular with celebrities.

What are some of the features of one of these high-end toilets?

One of the basic features is the lid will lift automatically. It will deodorize the room. It has special dirt-repelling, extremely advanced chemicals layered on the ceramics. They all have a remote-control panel next to the toilet so that you can adjust the heat. All the seats are heated; that’s just standard. Some of the toilets can check your blood pressure. Some can test your urine. Some of them can weigh you. They can play you music. You can plug in your MP3 player. I think the only thing they can’t do is read to you.

There is so much technology fetishism in the U.S. about things like iPhones, but there just don’t seem to be much interest in innovations in toilets?

The way to convert someone to the beauty of a Washlet toilet is to use one. I’ve spoken to lots of people, Americans included, who have been to Japan, and they just go, “Oh God, yeah, the toilets are amazing.” But because they’re not the widely spread yet in the states, most people don’t come across them.

So, we’re just content with these high toilets, which actually physiologically are kind of impeding our normal bodily processes. You actually don’t want to be seated high up on the toilet. That’s not helping your evacuation processes.

Squatting is better for you?

Squatting is better. I’m not suggesting that we all go and get squat latrines. But certainly toilets in the U.K. are very high now because they’re like thrones or chairs, and that’s not the best physiological position.

What’s the story with ecological toilets?

In Germany, ecological sanitation is quite popular, and one of the most common ecological toilets is called a urine-diverting toilet. It makes very good ecological sense because if you make sewage less liquid, it’s much easier to treat afterward.

What happens with the urine?

You can just pipe it off somewhere else. It’s a very good fertilizer. It contains a lot of nitrogen and phosphorous, so you can put it on your garden if you want to. The toilets require men to sit down to pee, so that is a bit of a stumbling block. But Germans do it.

There’s also the composting toilet, which uses no water whatsoever. It used to be known as an earth closet. You just have a toilet and you add some kind of ash, or soil, and it just decomposes and it’s apparently odor-free. You can use it in your garden if you leave it composting long enough. It should be perfectly safe and pathogen-free, but you have to do it properly. There are lots of composting toilets in America now. They’re particularly useful in rural or mountain areas.

I spoke to an ecological sanitation professor in Norway — Norway is also very fond of ecological sanitation — and he said that he has a friend who has a composting toilet. He said the friend has a little girl who had obviously grown up using a composting toilet, and when she went to school and saw this normal water toilet she was freaked out. She said, “What is going on? There’s all this water,” and she couldn’t believe it.

Because we have such water issues these days, we really do have to question whether throwing several liters of clean drinking water into a toilet, dirtying it and then spending millions and a loss of energy cleaning it again is really the best way to proceed.

Besides using water and energy, what are the other environmental impacts of industrialized sewage systems?

When human waste is treated it is separated into effluent, which is the cleaned liquid. Then it’s put back into the water system, and what you have left is solids, or sludge. That’s all the dirt that you’ve cleaned out of the sewage. In the states, the most common way of dealing with this is to apply it to land. It’s been renamed “bio-solids,” and it’s applied to land all over the country.

There is an increasing activist movement which is very unhappy with bio-solids being applied to land. One of their concerns is that there are heavy metals in the sludge, because our sewer system is set up so that everybody can put anything down their toilets, or their sinks. A recent investigation found that it’s common practice for hospitals to put their unused pharmaceuticals down the sink or down the toilet.

We don’t know what’s in the sludge; it can change from day to day. The people who are against sludge being applied to land say that, quite reasonably, until we know more about it, let’s be more cautious. On the other hand, bio-solids proponents are saying it’s perfectly safe, it’s all regulated, the EPA thinks it is safe, so it’s safe.

How have your own bathroom habits changed since you started researching this book?

I put the toilet seat lid down before I flush. When you flush with it open there is a very fine spray of whatever you’ve just flushed all over the room. So, I thought, well, I’ll just put the lid down, and I’ve become a bit of a nag about that idea.

Otherwise, I do think about our sewers. You can find motorbikes down sewers. You can find hospital aprons or syringes. There are all sorts of chemicals and pharmaceuticals and storm water. Grit — anything that comes off a road and goes down a drain — ends up in a sewer.

So I really think about what I put down the drain. I won’t put cooking oil down the sink anymore because I’ve seen congealed fat blocking a sewer. It was disgusting. It’s just these enormous blocks of fat. That’s what really disgusted sewer workers, more than excrement. They hate it. It gets into their pores, and it makes their lives extremely dangerous because they have to remove it. And it blocks the sewers. It’s just a very bad idea. Restaurants are pouring used cooking oil down the drain but so is everybody. And so I’ve become a bit of a puritan about that. I will wipe it out of pans and pour it on the garden.

I wash my hands differently. I wash them a bit more and I wash my wrists as well, because that’s in the CDC’s hand-washing guidelines, which are five or seven steps. But I also frown when I’m in a public toilet and people don’t wash their hands. I give them looks.

© Salon 2008. www.salon.com

There’s a hard lesson for us all that’s emerging from the current global financial crisis. Staying competitive in today’s volatile and fast-changing business world requires the striking of the right balance between risk and reward. To achieve and retain their potential, companies need fast, easy access to the information and people that can help them make the right decisions.

“That’s why we have invested in global industry centres around the world,” says Caroline van Noordenne, Partner Multinational Corporate Tax at Ernst & Young in the Netherlands, adding, “These serve as virtual hubs for sharing industry-focused knowledge and experience.

“Our commitment of time and resources means that we can anticipate market trends, identify implications and develop clear points of view on relevant industry issues. Our multi-disciplinary teams help clients to fully assess their tax strategies and exposures while also assisting them with international tax issues – from forward planning, through reporting to the maintenance of effective relationships with the tax authorities.

“Our talented and highly experienced people draw on their global insights and perspectives to help clients build pro-active and integrated global tax strategies that address the tax issues of today’s businesses and help them achieve sustainable growth.

“The challenges presented in the minefield of current tax systems are formidable. We believe a good starting point for getting things right is for each company to carefully and comprehensively formulate a formal tax strategy. To some, this might seem just another bit of paper but it needs to be seen as much more than that if your tax function is to add real value to the business.”

In response to increased scrutiny from the revenue authorities and other regulators, leading companies now view a tax strategy as a dynamic framework that is shaped by internal and external drivers. These companies use their tax strategy to define how the business can operate in the most effective manner, which these days is about so much more than a lower effective tax rate.

A workable tax strategy needs to be as comprehensive as possible and should cover a number of key elements. The starting point is to define objectives for the tax function that are aligned to the company’s overall business strategy and there should be a governance and risk management model to enable those objectives to be achieved.

The roles and responsibilities for tax matters in the tax department, in finance and in the business, right across its key jurisdictions, need to be clearly defined. So too should be relationships with the revenue authorities, external advisers
and other relevant third parties.

A data and systems’ supply chain needs to be created to support the tax function. Of course, writing this all down into a strategy document is one thing, but it’s in subsequently putting it into practice for the long term that many companies fall down. “Yet the benefits are manifold,” says Caroline van Noordenne, “A robust, board-approved tax strategy will fully respond to tax authorities’ expectations when it comes to matters of governance.

Clarified tax planning
“It will create clarity about the company’s tax risk appetite, which will facilitate identification of tax-planning opportunities that are appropriate to the business’s wider commercial objectives and will give a consistent and efficient review and evaluation of tax-related matters.”

Moreover, it will pinpoint improvements that can be made in tax-related systems, processes and controls, identify clearly where additional tax resources or funding may be required and monitor and strengthen governance procedures in decentralised and overseas jurisdictions, as well as raising the profile of tax concerns among key business and financial stakeholders.

Adds van Noordenne: “Here at Ernst & Young we can use our holistic approach to tax strategies to tailor our advice to a client’s needs by focusing not only on the strategy document but on the implementation and improvement of its provisions across the operation. “Given the kaleidoscopic array of factors, from globalisation, ever-tougher regulatory pressure, increased demands for transparency, tight resource pools, shorter financial close cycles, advances in technology, ever-greater tax complexity and sensitivity to risk, the demands and expectations surrounding tax function performance have increased beyond all measure and critically affect all phases of the corporate tax-life cycle.

“Consequently, corporate leaders are redefining the role of the tax function. They now expect bottom-line contributions, timely decision-making support and accurate tax reporting, combined with greater operational efficiency and more effective tax-risk management.

“Ernst & Young’s Tax Accounting & Risk Advisory Services (TARAS) practices, which are networked throughout the world, have highly qualified tax function professionals who work with clients to implement the people, process and technology changes that are required in order to create a more effective and sustainable tax function for the future.”

Ernst & Young, a dynamic firm that now employs more than 130,000 people globally, continually introduces more and more refined services.

A recent development in Ernst & Young’s offerings in the Netherlands is the introduction of an efficient statistical sampling technique that provides a clear insight into potential VAT and wage tax and national insurance contribution risks faced by a business. This responds to developments that the Dutch Supreme Court formally approved – the Dutch tax authorities audit method/technique known as the ‘guldensteekproef’, or literally translated, ‘golden random sample’.

Ernst & Young is highly familiar with the parameters used by the Dutch authorities and is able to perform a similar random survey to provide clients with an estimate of their VAT and/or wage tax and national insurance contributions exposure risk. The sampling also fits into other recent developments around horizontal monitoring, and as an annual check, can also contribute to the enhanced monitoring of the tax control framework; but more on this later.

Its operation is simple. The client provides Ernst & Young with the relevant data either as files or, using easy-to-follow instructions from Ernst & Young, by means of a standard functionality of the ERP system. An Ernst & Young auditor then ‘draws’ the random sample and asks the client to provide specific invoices from their records. Ernst & Young’s Indirect Tax/Human Capital team will then review the invoices and determine the extent of the potential VAT and/or wage tax assessment by using the same VAT auditing techniques that are employed by the Dutch tax authorities.

If required, the firm assists the client in discussions with the tax authorities on the outcome of the sampling, as well as setting up and improving the client’s control framework and risk management strategy relating to VAT and wage tax/national insurance contributions. Using this sampling technique on a regular basis enables the client to monitor VAT, wage tax and national insurance contribution risks on a structural basis. Furthermore, Ernst & Young Indirect Tax/Human Capital has been able to get the Dutch tax authorities to accept that self-initiative by the client constitutes horizontal monitoring.

Better monitoring
Observes Caroline van Noordenne: “Some of our clients have now concluded agreements with the tax authorities that recognise that the use of this statistical sampling technique is part of their tax control framework and they now have periodical meetings with them to discuss the outcome. This allows time-consuming VAT and wage audits to be minimised while at the same time strengthening the client’s ongoing working relationship with the tax people.”

An annual statistical audit can contribute to better monitoring of the tax control framework. In particular, the sampling method can be used to check whether or not the internal procedures that should have been implemented are in fact being carried out. Importantly, carrying out a statistical audit provides the opportunity for the client to agree with the tax authorities that no penalties will be levied, provided that any errors identified are corrected on a voluntary and proactive basis. Back in April of 2005, the Dutch tax administration initiated a pilot horizontal monitoring scheme that involved 20 of the country’s largest corporate taxpayers.

The aim of horizontal monitoring is to improve the relationship between the tax authorities and corporate taxpayers, based on trust and transparency, with the spin-off benefit of increased efficiency for both sides in the tax process. Soon after the pilot scheme’s introduction, a further 20 very large enterprises began to take part and responses to the programme were generally very positive, with 94 percent of the participating companies signalling to the Dutch Ministry of Finance that they were very satisfied with the horizontal monitoring regime and agreeing to continue their commitment.

This reaction led to a further 1,500 very large companies being approached to participate in horizontal monitoring. Horizontal monitoring can be characterised as a form of voluntary disclosure under which the taxpayer promises to actively notify the tax administration of any issues that have a possible significant tax risk and to disclose all the facts and circumstances surrounding these issues without hesitation or reservation. In return, the tax administration promises that, having received disclosure, it will provide timely advice on the matters concerned, taking into account real commercial deadlines for doing so.

Additionally, the taxpayer agrees to file its tax returns within an agreed time-frame and the tax authorities undertake to impose tax assessments as soon as possible after receipt of the return and to do so in consultation with the taxpayer wherever possible.

The objectives of a compliance agreement are to create a collaborative approach that will make more efficient and less costly use of the resources of both the taxpayer and the authorities. It will reduce tax uncertainty and at the same time discourage the use of aggressive tax-planning schemes that would otherwise end up being challenged as part of the regular tax audit process. Its over∞riding aim is to create real trust and openness between the taxpayer and the revenue authorities, for everyone’s benefit.

Less rigorous audits
Companies taking part in the horizontal monitoring regime should face far fewer and less rigorous tax audits since all the relevant facts and circumstances have been discussed upfront. This is a major advantage for taxpayers, since tax audits are not only extremely time-consuming but usually take place years after the relevant facts and circumstances took place – a factor that bears the strong risk that the relevant information, and the people involved, are no longer available.
The two parties formalise their responsibilities and obligations by entering into a so-called ‘handhavingscovenant’ or compliance agreement.

A horizontal compliance agreement may cover all taxes and is forward-ooking rather than being retroactive. It generally applies from the date of signing and it is important to understand that it is a purely voluntary agreement from which either side can withdraw at any time.

Concluding a compliance agreement is a move that is usually combined with a separate settlement agreement covering previous fiscal years that allows a catch-up so that everything starts with a clean slate. A compliance agreement does not change the Revenue’s nor the taxpayer’s rights, responsibilities or power but, instead, is aimed at facilitating more transparent control over compliance with the relevant laws and regulations.The parties may still end up agreeing to disagree and in such cases they are still free to seek judgement from the tax courts.

Companies like to be in control of their own destinies and do not like being confronted with surprises. Building a tax control framework that is embedded in the organisation to ensure the proper implementation and documentation of the company’s tax strategy and its risk management processes and controls results in an increasingly sophisticated and efficient way in which the company manages its tax risk and liaises with the authorities.

“The availability of an enhanced relationship with the tax authorities, as also envisaged by the OECD, has the potential of further accelerating the trend towards horizontal monitoring,” comments Caroline van Noordennne. “However, there is at present a stumbling block where SMEs are concerned. They are excluded from the regime for now because their sheer weight of numbers would at present overwhelm the system.

However, the tax administration has concluded compliance agreements with representative associations in certain specific business sectors and the member companies of such associations can voluntarily join such a sector compliance agreement.”

The motto of the Dutch Revenue is to help taxpayers who are prepared to work openly and cooperatively to pay the right amount of tax at the right moment.

Accordingly, the taxpayer shares knowledge of business, business developments and emerging tax risks in real time and before returns are filed while the revenue people work with the taxpayer to focus only on important issues and to resolve these before the returns are filed.

The taxpayer is responsible for operating a well-embedded tax control framework and for actively reporting in advance all significant potential future tax risks. It is also incumbent on the taxpayer to disclose all circumstances and facts regarding these issues, without hesitation or reservation; to inform the Dutch Revenue of the company’s view on the tax implications of facts and circumstances and reporting positions taken; to not only allow but to encourage free and open dialogue between relevant staff and the revenue; to provide any requested information as completely and quickly as possible and to file tax returns promptly.

Timely advice
In return, the revenue undertakes to provide timely advice on disclosed significant reporting positions; to periodically discuss the tax risks that the revenue has itself identified; to inform the taxpayer of relevant information relating to tax risks that have been highlighted by the taxpayer; to explain fully why certain information has been requested; to consult with the taxpayer on deadlines for responding to such requests; to impose tax assessments as soon as possible after receipt of the return and, where possible, in consultation with the taxpayer, and to indicate in advance which specific risks it will focus on in any tax audit.

Says Caroline van Noordenne: “We assist our clients in the entire process on the way to securing a horizontal monitoring compliance agreement, both the trajectory preparing for horizontal monitoring and the discussions with the tax authorities themselves. This includes discussing, assessing, designing and documenting the tax function and tax control framework, undertaking risk assessments, carrying out tax controversy reviews and statistical sampling and negotiating closure of open tax years and the content of the compliance agreement itself.”

“Ernst & Young in the Netherlands offers a full range of tax services. Given the current challenging business environment, executives are seeking to align their global tax position with their overall business strategy in order to maintain a competitive edge and provide best value to their shareholders.

“Ernst & Young International Tax Services helps clients manage their tax requirements by leveraging its integrated global network of dedicated international tax professionals, working together to manage global tax risks, meet cross∞border reporting obligations and deal with transfer pricing issues. Multi∞ disciplinary teams help clients to assess their tax strategies and exposures, assisting with international tax issues – from forward planning through reporting to maintaining effective relationships with the tax authorities.

“Our highly talented people draw on their global insights and perspectives to help clients build proactive and integrated global tax strategies that address the tax risks of today’s business environment and achieve sustainable growth. It’s how Ernst & Young makes the difference.”

Backers of extreme technologies to curb global warming advocate dumping iron dust into the seas or placing smoke and mirrors in the sky to dim the sun. “We are at the boundaries, treading in areas that we are not normally dealing with,” said Rene Coenen, head of the Office for the London Convention, an international organisation that regulates dumping at sea.

California-based Climos is seeking to raise money to test adding iron dust to the southern ocean to spur growth of algae that grow by absorbing heat-trapping carbon dioxide from the air. When algae die, they fall to the seabed and so remove carbon.

Other short-cut ideas include spraying a smoke of tiny particles of pollutants into the sky to dim sunlight, or even deploying a vast thin metallic barrier in space, with 100 space shuttle flights, to deflect the sun’s rays.

The UN Climate Panel has said world greenhouse gas emissions from human activities, mainly burning fossil fuels, rose 70 percent between 1970 and 2004.

But it said that fertilising the oceans or dimming the sun “remain largely speculative and unproven, and with the risk of unknown side-effects.”

“More evidence has been coming in since then, but it’s far from making a reliable case for geo-engineering,” said Terry Barker, head of the Cambridge Centre for Climate Change Mitigation Research and one of the leading authors of the UN panel report.

The seas are already suffering enough from a “chemical soup” of pollution from humans, he said. “There’s no need to add to the mess.”  With fears of recession and amid the deepest financial crisis since the 1930s, some governments may find cheap geo-engineering attractive compared with reducing carbon emissions. “It would be shortsighted,” Baker said.

Last year, the London Convention said that “knowledge about the effectiveness and potential environmental impacts of ocean iron fertilisation currently was insufficient to justify large-scale operations.” Those doubts were “still valid,” Coenen said.

Firms such as Australia’s Ocean Nourishment, Atmocean in New Mexico and Climos are working on varying sea-based projects. Another start-up, Planktos, indefinitely suspended operations in February after failing to raise cash. Some like Climos hope that sucking carbon into the ocean, if it works, could qualify for credits as carbon trading. “It is possible to design experiments to avoid harm to the oceans,” said Leinin. Climos wants to test iron fertilisation in the southern ocean, at the earliest in January 2010 in a test that could cost $15-20m, she said. If it works, Leinin said it could be one of the cheapest ways to combat global warming.

Among objections are that carbon makes water more acidic and could undermine the ability of shellfish, crabs or lobsters to build shells. That in turn could disrupt the marine food chain. Backers of geo-engineering say the risks are slight compared to far bigger disruptions from climate change, stoked by human emissions of greenhouse gases, which could lead to heatwaves, floods, droughts, more disease or rising seas. “We are already bludgeoning nature,” said Victor Smetacek, a professor at the Alfred Wegener Institute in Germany, who is planning an iron sulphate fertilisation experiment off Antarctica in early 2009. His institute will cooperate with India to disperse 20 tonnes of iron sulphate near South Georgia over 300 sq kms.

“Iron has a very positive effect. Added to the ocean it’s like water in the desert,” he said. “We don’t have space to store the carbon we are producing on land,” he said of proposals including planting more forests. They will study how far algae grow and absorb carbon. The extra algae, as food, might help a recovery of stocks of shrimp-like krill, a species on which penguins and whales depend.

Among other schemes, Nobel chemistry prize winner Paul Crutzen has floated the idea of blitzing the upper atmosphere with sulphur particles to reflect some sunlight back into space. “The price is not a factor… it’s peanuts,” he told Reuters in Nicosia earlier this month. “The cost has been estimated at some $10m-$20m US dollars a year.”

Similar smoke is released naturally by volcanic eruptions, such as Pinatubo in the Philippines in 1991 or Tambora in Indonesia in 1815. The Indonesia eruption led to a “year without a summer,” according to reports at the time.

Other proposals reviewed by the UN Climate Panel include installing a metallic screen covering a 106 sq km patch of space 1.5 million kms away from earth in the direction of the sun. The 3,000-tonne structure could be put in place over 100 years by 100 space shuttle flights. “The cost has yet to be determined,” the panel said.

Another idea is to spew more sea spray into the air – a natural process caused by waves. The plan would make low-level clouds slightly whiter and bounce solar rays back into space.

Much of the Middle East is undergoing truly transformational change – a fact not lost on many Western construction contracting companies eyeing opportunities in this fast-changing region. But such companies often bring with them their own needs, be it for equipment, local infrastructure support – even basic needs like language challenges. That’s not a problem for a home∞grown Middle East company like Orascom Construction Industries (OCI). Osama Bishai, a director since 1998, has seen a slew of western companies attempt to work effectively in the region over the years. “Our international competitors often have quite an expensive approach to projects. We have the international sophistication of typical international players, but in most of the regions we work in we own our equipment, we have a lot of existing local on-the-ground support already present and can take on projects, big or small, which is quite a rare combination in the construction industry. There are a few companies like us, but not many.”

Several roofs, same house

• Orascom Construction Industries – deals with large industrial and infrastructure projects principally in the Middle East and North Africa 


• BESIX Group – focuses on major commercial, industrial and infrastructure projects throughout Europe and the Middle East 


• Contrack International – pursues institutional projects in the Middle East and Central Asia

OCI ‘s construction expertise is broad, focusing on large industrial and infrastructure projects – predominantly based in the Middle East and North Africa – as well as major commercial projects across the Middle East and Europe through construction partner, the BESIX Group. “We’re very bullish on the construction industry generally in the Middle East region,” says Bishai. “We’re also in quite a comfortable position. It’s a combination of infrastructure and building work – a lot of work in the utilities sector, for example. Geographically, we’re also very well spread, from the Gulf, Qatar to Algeria.”

Much of the infrastructure work is also being driven by energy demands. Energy in the Middle East is in short supply so independent energy-related projects, such as natural gas, are a big boom area. OCI is deeply embedded in this sector and have made big strides, particularly in the fertilizer business. By 2010 Orascom is likely to be ranked amongst the top 10 nitrogen-based fertilizer producers in the world. “The fertilizer business is an excellent arm for ourselves,” says Osama Bishai. “More than 50 percent of our profits come from the fertilizer business. Prices are volatile and things could be even better next year.” Building on this success, OCI recently bought the Egyptian Fertilizers Company, manufacturers of 1.3 million tonnes of urea annually. The completion of their first greenfield fertilizer plant will add an additional annual production capacity of 800,000 tonnes of ammonia when it comes online at the end of the year. Obviously, OCI  remains very keen to continue developing new greenfield opportunities and partnerships in this sector, which should strategically strengthen its position further.

Renewable energy – the big push
OCI  recently won the first major wind power project ever to be undertaken in Egypt, which is partly funded by a World Bank initiative. “That puts us in a very good position to leverage similar projects in the region, be it the Emirates or Algeria. We have to consider that renewable energy, like solar, is not yet considered a cheap form of power. It needs a lot of subsidies from governments and international agencies. But in the long term, OCI  is in a very, very good position as far as solar is concerned.” Predicting just how soon such renewable energy sources are likely to become more cost-effective is, of course, extremely difficult to predict. “A year ago everyone was saying that solar had to be a much more economical choice. But that was when oil was costing $150 a barrel. Now we’re talking $60 a barrel. Things have changed considerably.”

New power generation projects OCI recently completed include an alliance with Hitatchi and GE Water & Process Technologies. “Obviously we are pursuing renewable energy opportunities, be they straightforward construction projects or where co-investment is needed from government,” says Bishai. “We are also looking very hard at wind power. We have done quite a lot of work in this area already and we intend to improve on this.”

Risks and opportunities
Despite much of the current global economic doom, many opportunities remain says Osama Bishai. “A lot of new work is likely in the areas of water desalination and power generation, particularly in the Middle East region. We believe we’re in the right place for those opportunities.”

Of course, there is still concern about credit supply and the ability to borrow for many companies. Investment costs for some have already gone up thanks to tighter lines of credit. That means the cost of development will go up for some developers admits Bishai. “However, we’ve also seen commodity prices decrease in some instances. Certainly we have signed contracts in the last year where falling commodity prices will benefit us. Plus we have a backlog of work in some areas. So it’s a very fluctuating situation which we will continue to monitor.”

Bishai is particularly optimistic on business in Algeria. OCI  recently significantly increased annual steel fabrication capacity in North Africa through a new greenfield state-of-the-art steel fabrication plant. Fabricated steel is a vital component in the construction of industrial projects especially in the oil, gas and power sectors, as well as in infrastructure works. According to Bishai, the country’s prudent economic policies have increased its appeal: “Algeria have been particularly conservative on budget projections. Also they have very little exposure generally to the global credit market. Their banking system is highly localised. The Gulf generally is pretty well-insulated too. Saudi is another place where they have major reserves that support their economic superstructure.”

Creating shareholder value
Looking ahead, Bishai sees plenty of opportunities to enhance shareholder value. “That is always the aim,” he affirms. “Even though conditions have been difficult, we were confident enough to pay out the largest dividends – from a Middle Eastern company – at the start of the year. “We’re also constantly adapting, learning and making our projects as lean and aggressive as they can be. We’re also very selective on the opportunities. Although credit supply can be tight for some, we don’t want to waste time on projects where finance is difficult. We want serious projects were we deliver real value to the customer and make money for ourselves and our shareholders.”

New contracts should translate into healthy margins based on a marked improvement in the competitive landscape for construction services since 2007 – and several new awards for OCI reinforce this. Infrastructure work on the Al-Reem Island and the Saraya development in Abu Dhabi – worth a combined value of $251m – are Orascom’s first contracts in this promising market. Contrack International, part of OCI, was also awarded a contract in consortium with Spain’s OHL, valued at $2.4bn for the Sidra Medical and Research Centre in Doha, Qatar, of which its share is 4bn Qatari Riyals ($1.1bn).

There is a growing feeling in the battle against climate change that the world community may have missed the obvious: that rainforests are the low-hanging fruit which can buy time to develop longer term solutions. The Prince of Wales was one of the first to appreciate this and to form an overarching plan to halt tropical rainforest destruction.

On July 2nd last year, The Prince attended a dinner at The Royal Albert Hall to celebrate the annual Awards of his responsible business charity, Business in the Community (BITC). He has been President of BITC for twenty years and has long been a leader and promoter of responsible business.

The dinner was attended by many of the 70 or so FTSE 100 companies which are members of BITC, with the environment as the main focus of the evening. It came at a time when The Prince had been reading a number of papers prepared by NGOs about the impact of rainforest destruction and as he spoke to business leaders during the evening, the thought crystallised in his  mind to create the largest private, public, NGO sector partnership to tackle this issue.

His staff began discussions with business leaders the next day and within a very short period had brought together a group of 12 Companies, a core staff of five people and a panel of advisers including Lord Stern. The Prince’s Rainforests Project (PRP) was subsequently launched that October and now has a steering group of 17 Companies and a staff of 20 people to bring together the parties best able to find solutions to the problem, such as the rainforest governments, NGOs, financial institutions, monitoring organisations and those involved in the supply chain of forest product.

Forests are in the front line of the fight against climate change and must be in the front line of any global agreement to reduce greenhouse
gas emissions. As the largest store of carbon on land, rainforests are the most efficient mechanism we have for taking CO2 out of our atmosphere. Meanwhile our destruction of them, accounting as it does for around a fifth of annual global emissions, represents one of the most needlessly profligate ways of adding to the atmospheric CO2 concentration.

Different approaches
A comprehensive climate change strategy not only needs to be as broad as possible in terms of global participation, it must also contain immediate strategies to contain the rise in green house gases. That is why rainforests must be in the front line of climate change solutions. 

There have been separate national initiatives, such as the Government of Norway’s decision to allocate $2.5bn to the rainforests over five years, the ‘Amazon Fund’ announced by the Brazilian Government in early 2008 to channel direct investment into capacity-building and other infrastructural measures and the extraordinary gesture from President Jagdeo of Guyana of offering the protection of his rainforests to the global community in 2007. Indeed the Iwokrama Project in Guyana (see p.168) represents an innovative model for the proper valuation of the full range of ecosystem services provided by the rainforests which may well have application elsewhere.

But while there is a momentum gathering behind the task of preserving the world’s remaining rainforests, there is also a more worrying momentum behind the drivers of deforestation such as cattle ranching, soy and palm oil production and timber extraction. Our experience with our Africa Task Force and other rainforest nations leads us to believe that the pressure on the rainforest is greater than ever before.

So what will the PRP do to help? At half-time in the Project, we’ve come up with a range of draft proposals which were first announced by The Prince of Wales in the Presidential Lecture in Jakarta on November 3rd and, following
further consultation, will be presented in a final report due in March 2009.

At the heart of these proposals lies one simple idea: that each rainforest nation should be paid for the ecosystem services they provide to the world via a valuation based on the costs of developing its economy without further deforestation as well as assurances that the correct mechanisms are in place for measurement, verification and the proper transfer of funds.

Emergency package
Funds to support this will eventually come through international carbon or broader ecosystem markets but this will take time. Therefore the PRP proposes an emergency funding package, not unlike the US Marshall Plan post-World War II, to enable rainforest nations to take action from 2010. It proposes the establishment of a global negotiating and purchasing entity which will raise funds from developed nations. It will then make payments due under multi-year deals with rainforest countries for the provision of ecosystem services. It would also monitor, using agreed verification procedures and standards, the activities of the rainforest countries against the performance criteria of their agreements.

Methods by which developed nations provide or guarantee the funds deployed are detailed in the draft report, available on our website.

Any annual payment system will require global forest monitoring. The PRP is therefore actively involved in acting as a catalyst in the development of such a system.

Deforestation is driven in the large part by demand from the developed world for food, timber and palm oil. There are a number of important initiatives building on the demand for sustainably produced products which the PRP is using its unique position to accelerate. We have commissioned important pieces of research which will inform the process and lead, we hope, to practical examples of sustainable supply chain management. Without addressing this challenge, it will be very difficult to make the trees worth more alive than dead.

But above all, we have to create the global will needed to bring all this about. To this end, the PRP will launch a bold media campaign, which seeks to mobilise public support for the inclusion of forests in a future comprehensive climate change deal so that negotiators at key conferences feel they have a mandate to act.

As I write this article in mid-October 2008, there are plenty of grounds for pessimism about rainforest destruction. A global recession may divert attention from climate change, yet won’t do more than delay the relentless drivers of rainforest destruction engendered by the industrialisation of eastern economies.

However, there are also reasons for hope. The global financial crisis has brought about greater international cooperation than has been seen for decades and it may be that this, together with a new preparedness to look at challenges in new ways, provides exactly the catalyst needed to bring about something as bold as our plan. Certainly we know that to underestimate a risk when it is seen leads to greater risk of expensive bail-outs later on.

It really comes down to whether we are able to show the same level of concern for the world inhabited by the next generation as we have been to show for financial instability in our own.

As James Lovelock puts it: “Mankind is, by its intelligence and communication, the planetary equivalent of a nervous system. We should be the heart and mind of the Earth, not its malady.”

The vat of still blue water containing enriched uranium rods at Germany’s oldest nuclear plant looks as harmless as a public swimming pool. But the stifling heat in the domed reactor building and the sight of workers in orange jumpsuits with Geiger counters, white gloves and layers of plastic covering their feet betray the risks of nuclear power generation.

Oxygen masks hang on the walls of the earthquake-proof reactor building and on leaving the area in RWE’s Biblis plant in southwestern Germany, visitors are subjected to two body scans for radioactive contamination. The risk underlined by these precautions partly explains why Germans have for decades nurtured an aversion to nuclear, which supplies just under 30 percent of power needs compared with 80 percent in France, the world’s leading nuclear nation.

The industry is growing globally and other European nations including Britain and Finland are reviving nuclear. But Germany – where about half the power comes from coal – has so far stuck to a 2001 law to phase out nuclear reactors by 2021. The ground is shifting, however: oil prices which have risen fivefold since 2001, fears about energy supply security and the need to curb carbon dioxide emissions have boosted support for nuclear in Europe’s biggest energy-consuming state.

The issue will be significant in September 2009’s election, when nuclear-friendly conservative Chancellor Angela Merkel will fight the anti-nuclear Social Democrats (SPD) with whom she has shared power since 2005. “It’s a very emotional topic and people, including politicians, don’t always base their arguments on fact,” said Reinhold Gispert, head of the works council at Biblis.

Data shows German reactors are safe – they have a low rating of incidents on a scale set by the UN’s nuclear watchdog, the International Atomic Energy Agency. “We maintain and modernise all the time so we really can say the plant is safe,” said Juergen Haag, chief engineer and deputy head of Biblis.

Although there is no prospect Germany will build new nuclear stations, there are signs some closures could be put on hold.

Change of course?
Two plants have been decommissioned and there are 17 more to go, but public opinion could nudge lawmakers towards a change. A recent survey by pollsters Emnid showed 52 percent of Germans support later decommissioning for atomic plants, up from 49 percent in March.

“There’s been movement but the question is if the ball will move forward more,” said Gispert of the Biblis works council. “For us it’s about jobs, lives and families.” Biblis has an installed capacity of 2,500 megawatts of electricity and its turbines, whose deafening roar resonates through its building, produce power for 6.5 million households.

Its two reactors, opened in 1974 and 1976, are due to close in 2009 and 2010. Haag says they could run for 60 years and RWE is waging a court battle to win a reprieve until 2013 by seeking to transfer quotas of power produced from another RWE plant which closed before it had used up its full allocation. Beyond that, the future of the roughly 1,000 workers at Biblis and thousands more across Germany who work for the other operators – E.ON, Vattenfall and EnBW – depends on a change of heart from lawmakers.

The issue is hardest for the SPD, which introduced the phase-out law when it ruled with the Greens and forced Merkel’s conservatives to stick with it in their 2005 coalition deal. A generation of West German Greens and Social Democrats made their careers leading protests against atomic power in the 1970s and 1980s, especially after western Europe felt the effects of the world’s worst nuclear disaster at Chernobyl in 1986.

“Any change would be extremely hard for the SPD, whose rank and file would resist,” said Bernhard Wessels, a political analyst at Berlin’s Free University. Warnings from environmental groups about the risks of civilian nuclear technology being hijacked by rogue governments or terrorists – and the tricky question of what to do with nuclear waste – give ammunition to the anti-nuclear lobby.

Germany has stepped back from solving the question of waste by suspending research into a possible permanent storage site in a northern state. Sceptics redoubled criticism when a separate temporary depot for low∞level waste was found to be leaking. An option for the SPD would be to make it a social issue and say nuclear would bring down energy costs,” said Wessels.

Some estimates put nuclear power production costs at two cents per kilowatt hour, cheaper than power from coal or gas and less than a quarter of the cost of fashionable wind energy.

Greener?
Pressure to meet climate change goals could also provide political impetus and there are signs the SPD is open to ideas. Former SPD minister Erhard Eppler broke a taboo in July by suggesting his party could agree to extend the lives of plants as an interim step while renewable energy is developed.

Germany aims to meet EU targets to cut greenhouse gas emissions by 20 percent by 2020 from 1990 levels as well as a self-imposed goal to have renewable sources accounting for 30 percent of the country’s energy from about 14 percent now.

Even modern coal-fired plants, still being built, have high carbon dioxide emissions. Merkel’s conservatives have proposed putting the closures on ice if operators pay some €40bn to develop renewable energy. The firms, which could each earn more than €1m per day for each plant that stays open, are open to the plan. 

But in the end, the prospect of shortages may be decisive. Experts warn of power supply gaps if the nuclear switch-off goes ahead. Stephan Kohler, head of government energy agency Dena argues that by 2020, Germany could be short of 15 large thermal power plants, or 12,000 MW. “Nuclear power is not ideal but it is the only parameter which can help us get through the next 10 years,” said Fritz Vahrenholt, a wind energy pioneer who led turbine maker REpower and is now head of RWE’s renewable unit RWE Innogy.