The future of tax consulting
Tuesday 27th Jun, 2017
By Fiona Czerniawska.
We've talked a lot in our blogs about the bifurcation of the professional services sector into low-cost and high-value markets, each requiring different skills, which in turn necessitates different price points and business models. But the impact, of what could be a massive driver of disruption, is softened by the fact that most services combine an element of both. From audit to corporate strategy and risk, professional services firms have an opportunity to reshape their portfolios, ensuring they can retain a presence in the high-value markets.
But what happens if you have services that don't combine high-value and low-cost elements?
I've been talking to various CFOs recently, all of whom were asking this question about tax consulting. Although tax planning can be very complex, they said, it's essentially rules-based. Moreover, governments the world over have been shutting down (de facto, if not de iure) the kinds of innovative tax deals that many large corporations and wealthy individuals have taken advantage of in the past. Barring a certain amount of work supporting international companies repatriating jobs from offshore locations or dealing with very specific issues (e.g., Brexit), none of them could foresee this situation changing. As a result, the only question they have now is how quickly the whole shebang can be automated.
So, from a client point of view, very little of today's tax work could be considered high-value, and they can't see that changing in the future. But if we look at how the supply side is reacting, most attention is going on how firms can hang on to their high-value services, because this is where most firms want–or feel they should–belong. How can they recruit the brightest and the best if they can't offer interesting work and the opportunity to learn and grow? For many people, joining a professional services firm is a staging post on the way to a senior position on the client side: How can you promise that unless you're a high-value firm?
All of this makes me wonder whether a better strategy would be to explicitly target the low-cost market, and to focus all your investment on technology that allows large corporations to do more of their own tax planning and smaller ones to be able to access thinking and tools outside their traditional budgets. What's preventing that shift in approach isn't the software, but changing people's attitudes internally, making them see low-cost work as an opportunity rather than a threat. Low cost, we should be clear, doesn't mean low value, but refers to services that have to be delivered very efficiently, which presupposes a high degree of mechanisation. Industrialisation doesn't translate into dumbing-down: developing and updating this software will be a huge intellectual challenge. It does, however, depend on acknowledging that the future of tax services will be very different from their present, that it will rely on a smaller number of experts whose jobs (designing algorithms) will be very different from the type of work tax professionals do today.