GE famously paid no taxes on billions in profit in 2010. Now PwC has snagged hundreds of members of the team that made that possible
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About half of General Electric’s famed in-house tax department is transferring to PwC in April, in a move that may signal even more competition for law firms.
Most of the approximately 600 people moving from the company to PwC are lawyers and accountants, Bloomberg said. Mark Mendola, PwC vice chairman and US managing partner, told the publication that about half of those transferring are in North America. The team also comprises people in the UK, South America, Asia and Africa.
The move is even more striking since the team is moving to a Big Four auditing firm and not to a large law firm, which many would consider to be where in-house legal teams would naturally go as evolving large corporates eliminate them.
GE’s tax team gained prominence for feats such as finding a way for the company, which had US$14.2bn in global profits in 2010, to pay no taxes that year. The revelation came from a New York Times story, which also described the team as “the world’s best tax law firm.”
PwC has struck a deal to handle GE’s taxes for at least five years, but the team will also be working on matters for other clients. GE will take a cut of the revenues generated by the tax unit for those five years, according to reports.
The deal comes as GE is transforming to a digital technology services company. As a result, it has offloaded most of GE Capital, its finance unit, and is looking to cut fixed costs from teams such as its large in-house tax team.
Harvard Law Professor David Wilkins told Bloomberg that the deal is just one example of the “rapid blurring of the boundaries between what used to be thought of as a separate and distinct professional services.”
Large professional services firms are diversifying, he said, as law firms see the unbundling of corporate legal services. Law firms are increasingly seeing general counsel break down matters, shopping around for the lowest bidder for each constituent part. The Big Four have positioned themselves for value but volume work while law firms face increased competition for the highest stakes matters, Wilkins said.
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Most of the approximately 600 people moving from the company to PwC are lawyers and accountants, Bloomberg said. Mark Mendola, PwC vice chairman and US managing partner, told the publication that about half of those transferring are in North America. The team also comprises people in the UK, South America, Asia and Africa.
The move is even more striking since the team is moving to a Big Four auditing firm and not to a large law firm, which many would consider to be where in-house legal teams would naturally go as evolving large corporates eliminate them.
GE’s tax team gained prominence for feats such as finding a way for the company, which had US$14.2bn in global profits in 2010, to pay no taxes that year. The revelation came from a New York Times story, which also described the team as “the world’s best tax law firm.”
PwC has struck a deal to handle GE’s taxes for at least five years, but the team will also be working on matters for other clients. GE will take a cut of the revenues generated by the tax unit for those five years, according to reports.
The deal comes as GE is transforming to a digital technology services company. As a result, it has offloaded most of GE Capital, its finance unit, and is looking to cut fixed costs from teams such as its large in-house tax team.
Harvard Law Professor David Wilkins told Bloomberg that the deal is just one example of the “rapid blurring of the boundaries between what used to be thought of as a separate and distinct professional services.”
Large professional services firms are diversifying, he said, as law firms see the unbundling of corporate legal services. Law firms are increasingly seeing general counsel break down matters, shopping around for the lowest bidder for each constituent part. The Big Four have positioned themselves for value but volume work while law firms face increased competition for the highest stakes matters, Wilkins said.
Related stories:
PwC taps former KWM, O’Melveny lawyers for HK legal launch
PwC taps Ashurst, NRF for APAC regional practice launch
