Tax jobs trends for 2010 - Part 2

Continuing his outlook for 2010, Iain Lorriman discusses how the market will evolve this year. The first part can be found here: Tax jobs trends for 2010 - Part 1.

Should I stay or should I go now?

Migration of multinationals from high to low tax jurisdictions has been a high-profile feature of the credit crunch. Tyco and Yahoo relocated to Switzerland’s lower tax regime, and Guy Hands and other tycoons moved offshore. This creates a deficit in the UK and opportunity overseas. The UK is still seen as the centre of international tax expertise par excellence. So it is no surprise that big roles in locations including Zurich, Qatar, Moscow, Hong Kong and Paris have been taken by UK tax practitioners.

The ratio of the number of tax practitioners moving in-house from advisory firms in continental Europe is about 15 years behind the UK – but rapidly catching up. The growth in the number of international tax opportunities in-house is the largest upward trend among our clients. Decentralisation among US multinationals for UK-based tax teams to tax experts based with the business in each key jurisdiction add to this traffic. This looks set to be a long-term phenomenon.

Happily, UK tax practitioners who are willing to relocate can take advantage of this.
Professional services firms bear the brunt of a downturn on reductions in transaction volumes and advisory fees. Law firms have been particularly exposed. Unlike an accountancy practice they cannot have a stable flow of revenue from audit and compliance. Nor do they have big countercyclical insolvency and restructuring practices. Those heavily hedged towards investment banking, M&A and real estate have suffered.
But they have also adapted.

Tax litigation has been a significant growth area. It has married very well with the general increment in litigation and dispute resolution among the firms. A number of law firms have for the first time demonstrated an interest in jumping on the transfer pricing bandwagon. Hiring partners or teams with a revenue following is a feature that is unlikely to change.

The accountancy firms have lost revenue in M&A and real estate but made up ground in specialist taxes and areas such as restructuring. A big question for 2010 will be how the larger firms adapt to service the needs of multinationals across borders. 2009 saw each of the Big Four take a different approach to attempting to work to the global, rather than national, client base. For those who get it right in 2010, the prize is enormous.

Heads of tax are frustrated by multiple account teams and relationships, and crave a global service level that reflects their business. A genuine cross-border professional service firm can also facilitate cross-border tax effective solutions and services. Some firms are divided by geography, others by service line. It will be fascinating to see who the end users, heads of tax and CFOs consider to be the best at delivering multinational service.

She loves me, she loves me not

It will also be interesting to observe the ‘she loves me, she loves me not’ dynamic between law and accountancy firms. Arguably the biggest wins of 2009 – the Lehman insolvency and the Lloyds-HBOS merger – were won by Big Four and magic circle firms acting in cooperation. Yet the demand for revenue has led the firms to encroach on each others’ traditional territories. The Big Four have all started building tax litigation practices as the law firms move in to transfer pricing. 2010 could see a few more allegiances won and lost.

So what of financial services, the focus of hope and despair in this downturn? With liquidity constraints have come headcount restraints. Some institutions are now more favourable locations for interim tax specialists. But where headcount is freed up, tax opportunities could be surprisingly abundant.

Banks are embracing new levels of corporate governance and risk control. Tax risk management of the front office and the institutions’ international framework is viewed as an essential part of building an adequate control function. In the last two quarters of
2009, the financial service sector was the biggest hirer of all inhouse areas. Delivering the correct advice and structures to business units, and a compliant international operations structure, is vital. The fact that a number of banks are coming back to profit and intend to use headcount for risk control bodes well for 2010.

Summary

The tax profession is a long way from the halcyon days of 2007. But in terms of opportunity there are sufficient legislative, commercial and geographical dynamics to create roles and challenges for many tax specialists. The areas that should thrive are VAT, TP and employee solutions. I also predict increased hiring in the international arena and our beloved banking sector.

Iain Lorriman is Director of Pure Taxation.