MATTHEW DWYER TAKES A LOOK AT THE TAX LEGAL MARKET
The tax legal market from a recruitment perspective is entering an exciting phase as law firms are looking to propel tax into the limelight (both from an internal and external perspective) as opposed to an ‘afterthought’ which has often been the case in the legal community. A number of threads have emerged to create an interesting landscape.
What we are seeing with many law firms is a real challenge to the big four and their multiple lines of revenue and specialisation within tax. This has taken the form of increasing appetite to have full service tax teams, i.e. covering not only the usual lines of corporate tax and private client but also tax litigation, investigations, employment taxes, indirect taxes and transfer pricing.
Berwin Leighton Paisner’s tax team led by Michael Wistow is a prime example of this. Michael says that the rationale for such an approach is to ‘meet the increasing demand from clients for an alternative to the big four and be able to meet all their tax advisory and structuring needs by having created the largest and broadest based City law firm’.
Other players are pushing into and breaking the traditional mould of law firm tax departments such as Olswang, Stephenson Harwood, McGrigors, Freshfields, Nabarros, CMS Cameron McKenna and McDermott Will & Emery. That said, the big four firms have re-aligned both their own mainstream tax teams with the hire of several tax lawyers in recent months and in respect of PricewaterhouseCoopers Legal bolstered their teams’ tax capacity with a number of hires.
PricewaterhouseCoopers Legal head of tax litigation Agnes Quashie says ‘tax litigation is certainly on the increase which is hardly surprising given the current climate. We have seen a sharp increase in our workload which has resulted in us almost doubling the size of the tax litigation team in the last year, including key hires such as Mark Whitehouse who joined us last November as joint practice group leader’.
From a recruitment and competitor perspective the key is to distinguish between marketing and PR value as opposed to real, visionary and structured thinking to harness all pieces of the tax puzzle.
To emphasise this, many leading heads of tax point out that it is not their intention to create multiple revenue streams, rather they want to stick to their core focus which is often corporate tax, transactional and M&A type instructions or, with the West End, niche and boutique firms, offering a one-stop shop for private client matters.
Hot spots
Transfer pricing was the hot topic of 2009 in respect of law firms pushing into an area seen to be the domain of big four firms but it remains to be seen how successful this foray will be. However, the increasing regulatory and risk-focused environment and the willingness of HMRC to litigate should maintain an argument that wrapping up transfer pricing capacity in the law firms is a savvy move.
Indirect tax saw limited redundancies throughout the recession. In terms of the law firms they have not ventured out into full-scale recruitment for indirect tax, with a few exceptions such as BLP which has recruited two VAT partners in the last year to bolster its existing transactional VAT expertise. Indirect tax in the law firms has been trialled with mixed degrees of success, but this could be a developing feature given the current market.
Legislative changes have kept the indirect tax practitioners busy. Greg Sinfield, head of indirect tax at Lovells says ‘the VAT package and other changes combined with the prospect of an increase in the rate of VAT after the election mean that VAT is more important than ever for most clients’.
A snapshot of actual recruitment activity has seen the start of 2010 mainly characterised by a strong demand from Magic Circle, Silver Circle (and especially US firms) for corporate tax lawyers at the junior-mid level, newly qualified and senior associate private client lawyers, corporate tax partners at a number of firms (especially US firms with some interesting greenfield options), bolt-on investigations teams and indirect tax litigators.
From an international perspective the law firms are challenging the big four in terms of their global reach. Although tax is a discipline that is often difficult to co-ordinate on a global basis, there are clear reasons why clients are instructing multinational law firms to assist them.
Sandy Bhogal, tax partner at Mayer Brown says ‘Given the restrictions on tax advice that auditors can offer to clients, and an increasing desire of businesses to integrate legal and tax advice more efficiently, it is inevitable that the scope of services tax lawyers offer has grown (from what was historically a transaction support function). This is likely to continue for the foreseeable future and law firms will therefore continue to expand their tax offering’.
Promising future
The tax legal landscape is likely to be just as exciting due to the following factors.
Ironically, the differences and similarities within the tax community (whether we are referring to the accounting or law firms) will bring all of us an interesting 2010.
