Top 50: avoidance pays

Gordon Brown is no friend of the tax adviser, it is sometimes said. But the
tax revenues of the last year’s Top 50 firms seem to tell a different story.

Far from seeing revenues go into sharp decline as a result of the
chancellor’s attempts to crackdown on tax avoidance, firms’ tax departments are
in rude health.

Fees for tax grew by around 7%, from around £1,850m last year to just a shade
under £2bn this year. The figures are estimates, using guesswork to fill the
gaps left by Vantis and others not giving a specific tax figure.

It looked particularly healthy at the top. The Big Four grew their tax
revenues by 8.5%, a cut above the average. The firms have achieved this in spite
of Brown’s attempts to eradicate tax avoidance. This year’s growth is
significant because previous years have been more difficult.
PricewaterhouseCoopers and Ernst & Young booked falls in tax revenue last
year.

‘Our business is driven by bigger business factors,’ says John Whiting, tax
partner at PwC. Change in particular creates a need for advice, and the rise in
mergers and acquisitions must be contributions to the numbers. On top of that,
people making a lot of money on the markets will be seeking ways to plan for the
gains.

A certain amount of the success must also have come from advisers’ ability to
use the avoidance crackdown as well, to ironically drive revenues. It is a trend
acknowledged by Big Four chairmen and chief executives, who explain unashamedly
that complexity, often driven by anti-avoidance moves, has driven demand for tax
services.

Whiting is unsure. ‘Undoubtedly complexity has a good deal to do with the
growth,’ he says. ‘But we also have to spend a lot of time understanding it all.
That’s a lot of extra effort that’s non-chargeable,’ he argues.

Among the numbers in the table, there are perhaps a few worth a special
mention. PwC exceeded the £500m mark, a sum it has not made from tax since 2003.
It will be welcoming growth after two years of declines.

Deloitte, KPMG, BDO, Bentley Jennison, Saffery Champness, UHY Hacker Young,
Kingston Smith, DTE, Francis Clark, Larking Gowen and Streets all saw double
digit growth. And at 42nd in the table, MGI Wenham Major, a new entrant, saw its
tax revenues leap by an astonishing 292%.

Are the prospects bleaker for the future? Given tax advisers’ seeming success
in meeting the challenges of the last few years, it would be foolish to be too
downbeat.

But pleas for simplification, ironically often from the profession itself,
and the popularity of ‘flatter taxes’ could see some of the advisers’ purchase
on the market dwindle. Simplification is however, unlikely without a change in
at the top political personnel.

Whatever happens next year, tax advisers will be toasting a healthy year in
2005/06. What, one wonders, does Gordon make of it all?