Transfer pricing clampdown drives work for tax advisors – Jan 20

We’ve just launched a Source Global Research report, featured in Bloomberg Tax and Accounting Today, finding that global tax advisors are being increasingly called upon by large corporates to advise on transfer pricing as tax authorities around the world clamp down on perceived abuses.

In 2018, advice on transfer pricing was the fastest growing area of tax advice in the global tax advisory market – and it’s now heading swiftly towards being a US$10bn sub-market in its own right by the end of 2019, as it grew 9.3% to US$9.2bn in 2018, and it’s projected to grow by 9% in 2019. In comparison, the Source Global Research report, The Global Tax Advisory Market in 2019 also revealed that the global tax advisory market (incl. transfer pricing advice) grew more slowly – at 6.5% to US$34.4bn in 2018.

Transfer pricing remains an area of growing focus for tax authorities around the world including HMRC. In fact, HMRC reported this year that its investigations into aggressive use of transfer pricing and related errors has seen a tenfold increase in HMRC fines imposed on multinational businesses in three years – imposing £413,437 in fines in 2018/19, compared to just £45,600 in 2015/16.

 Zoë Stumpf, Head of Market Trends at Source Global Research, added:
“Transfer pricing has become particularly high-profile for clients as tax authorities around the world focus more closely on this topic in an attempt to deal with perceived abuses; clients are increasingly looking to third parties to help them develop the right approach and avoid harsh penalties.” 

Expenditure on tax advice set to rise
The Source Global Research report also found that three quarters of large organisations (76%) expect to increase their expenditure on external tax support, with the priority areas being transfer pricing, indirect tax, and general administration and compliance.

The Source report says that these priorities reflect the fact that the use of external support is as polarised here as it is in other parts of the professional services sector, with firms expected to provide both low-cost services (such as compliance), alongside much higher-value ones like transfer pricing and M&A work.