As KPMG axes M&A tax staff, the question is who's next?

The Big Four made a fortune from the merger and acquisition boom that began in the 1990s.

Revenues from takeovers grew sharply and their M&A departments ballooned in size as they hired more staff to advise multinational clients on multi-billion takeovers.

But in 2008 when the global economic slowdown caused the M&A market to seize up, the big accountants were hit hard and began a wave of redundancies. Takeover advisers were among the first in line for a P45. Companies making a loss normally put takeovers on hold.

Now, it seems that the jobs of tax advisers are at risk after KPMG last week announced that it would cut jobs in its UK tax business due to a fall in demand for tax work relating to M&As.

The world’s third biggest accountancy firm has not said how many jobs it plans to cut, but an industry source said about 200 jobs could go. KPMG had hoped to cut costs and avoid further job cuts by allowing staff sign up for a four-day working week in a scheme announced earlier this year.

But the picture across the tax sector is not all bad. In KPMG’s tax department, for example, there is strong growth in tax-advice relating to pensions, indirect tax and corporate regulations and transfer pricing
Recent changes to pensions, such as the restriction to the availability of tax relief on pension contributions, have created more demand for corporate tax advice. The cut in the UK VAT rate to 15% in 2008 has also fuelled demand for tax services.

Tax experts say that large companies can save large amounts just by claiming the maximum possible VAT refunds.

Gary Harley, global head of indirect tax at KPMG in the UK says that one large telecoms company has been able to reclaim more than £20m in indirect tax refunds and made a ‘permanent cash flow benefit’ of more than £102m through improved organisation of its indirect tax affairs.

But will a growth in VAT and pension advice be enough to offset slower growth in M&A services? Anecdotal evidence suggests that some firms are cutting tax jobs but not a large number at one time.

Firms remain tight-lipped about where the axe will fall next. Asked about whether it planned to cut jobs in its tax department in response to a slowdown in business, a spokeswoman for PricewaterhouseCoopers said only: ‘The environment remains challenging and we are keeping our resource plans across our businesses under review.’