As an ex-employee of the Big Four, I was unsurprised to read this new paper uncovering the role Professional Services – “the wealth defence industry” – has played in facilitating and encouraging what is politely called “tax minimization”:
According to the UK House of Commons the provision of tax services to companies and wealthy individuals forms an industry, ‘worth almost £2 billion each year in the UK, and £25 billion globally’ (2013, p. 7). And while ‘some tax advice results in transactions or restructuring that are undertaken for commercial reasons and are neutral, much of the advice is aimed at minimising the tax that wealthy individuals or corporations pay
Looking at three types of corporate strategies which relate to tax optimisation – namely localisation strategies, organisational forms and corporate complexity – we find that these strategies occur more frequently in the corporate network of clients which are audited by one of the Big Four.
The causal direction of the relationship between demand and offer of profit shifting services remains left open by our study. It is possible that accountancy firms hold a rather passive position and exclusively supply tax and legal advice on behalf of requests by aggressive multinational companies. The image of neutrality which is perpetuated by the profession and the amplification of legal restrictions over the last decade support this vision. However, the insights into the activities of the Big Four through leaks and case-based investigations suggest that accountancy firms are proactive agents in the profit shifting business. The increasing pressures for commercialisation, as well as the capacity of accountancy firms to collect and manage knowledge through ‘centres of excellence’ support an agentic version of accountancy firms’ involvement in wealth defence. While for us, the second scenario is more likely, in either of the two, accountancy firms play a decisive role in the wealth defence business: either as active or as passive suppliers of financial and corporate innovation.
Thanks again to Syllabus for the link