Global tax advisors see growing demand for transfer pricing work
The global tax advisory market is growing as tax authorities around the world try to crack down on corporate tax avoidance strategies, and demand for transfer pricing advice is helping fuel that growth, according to a new report.
The report, from Source Global Research, found that the global tax advisory market grew 6.5 percent in 2018 to a total value of $34.4 billion. Advice on transfer pricing was the fastest-growing area of tax advice in 2018, growing 9.3 percent to $9.2 billion in 2018, and was projected to grow by 9 percent in 2019 to nearly $10 billion.
Transfer pricing has remained a growing area of focus for tax authorities globally. For instance, the U.K. tax authority, HMRC (Her Majesty’s Revenue and Customs), reported this year that its investigations into aggressive use of transfer pricing and related errors resulted in a tenfold increase in fines on multinational businesses in three years.
“Transfer pricing has become particularly high-profile for clients as tax authorities around the world focus more closely on this topic in an attempt to deal with perceived abuses; clients are increasingly looking to third parties to help them develop the right approach and avoid harsh penalties,” said Zoë Stumpf, head of market trends at Source Global Research, in a statement.
The global tax advisory market is expected to grow healthily through the end of this year, although fears of an economic downturn could reduce budgets and spending, leading to a slight slowing of the growth trajectory. The researchers expect a market increase of approximately 6 percent through the end of this year.
Seventy-six percent of the organizations surveyed for the report anticipate that they will increase their spending on outside tax support, with the priority areas being transfer pricing, indirect tax, and general administration and compliance. Professional services firms are providing both tax compliance work, along with more lucrative services such as transfer pricing and M&A advice. Tax firms are seeing expanding volumes of business across the globe, with the biggest growth in the Asia-Pacific region, Africa and the Middle East.
The Big Four continue to dominate the sector, performing 67 percent of global tax work, thanks to their vast global network. While there’s some concern about competition from technology firms, their encroachment hasn’t yet made a major impact on the competitive landscape.
“I worry about controversy for our clients,” said Susan Pitter, global deputy vice chair of tax at EY, who was interviewed for the report. “Less so in the U.S., and more so in APAC and Europe. Clients face a level of controversy that is unprecedented, especially in the area of transfer pricing. We're in a situation now where we used to have measures taken to prevent double taxation, but now the mood is that governments don't seem to mind that happening as long as they're getting their fair share.”
Nearly two-thirds of clients believe a significant amount of the work currently done by their in-house tax teams will be automated in the next five to 10 years, according to the report.