Corporations are increasingly leaning on outside accounting firms to help navigate complicated tax laws and take advantage of lucrative green energy incentives, a top Deloitte official said.
An ever-changing global tax and business landscape means companies need extra help, said Willem Blom, Deloitte Global Leader, Tax & Legal, in an exclusive interview Jan 7.
“More and more companies are looking to us as sort of advisers and saying it’s becoming harder and harder to keep up with all the new regulations,” Blom said.
“So there’s more of a demand from our clients to outsource part of those activities. I would say there’s a growing group of companies who are looking to decrease the activities they perform in-house, working with providers.”
Blom’s comments come amid a complex international tax environment with a proliferation of new laws seeking to curb profit shifting and increase transparency.
The 15% global minimum tax, which has been in effect in about three-dozen countries for one year, is poised to become more difficult to comply with as more countries adopt its rules and temporary simplification measures expire. Already, companies are required to apply the global minimum tax rules on a country-by-country basis, and some of the largest businesses operate in over 100 cities around the world.
US-headquartered companies also have to comply with the global intangible low-tax income regime, an American global minimum tax on US companies’ foreign earnings.
The largest of the US corporations must also pay a 15% corporate alternative minimum tax if their three-year average financial statement income is $1 billion or more.
The EU has enacted complex financial reporting regulations for companies in an effort to curb tax avoidance and some European countries have even applied digital services taxes—a small levy on big tech’s activities such as digital ad sales.
Tax Incentives
Blom noted that companies aren’t taking full advantage of lucrative tax incentives like those provided under the EU’s Green Deal, and President Joe Biden’s 2022 Inflation Reduction Act.
The IRA provided billions of dollars worth of tax credits for investment in the production of clean energy such as hydrogen, solar, and wind.
Blom said that it’s not always clear where the responsibility in a company lies for it to apply for these incentives—for example the financial department or the tax department.
As a result, more companies are looking to “professionalize” incentive planning, he said, and that includes seeking help from accounting firms like Deloitte to apply for these credits.
“The IRA or the Green Deal in Europe, the amounts available are so unbelievably significant that it takes a whole working group, it takes a steering committee within a company to make sure that that that is considered in a proper way,” Blom said.
“And what we see is that a lot of companies haven’t organized that.”
Legal Growth
Blom said general counsel and legal departments within companies “have a much larger need for support, around digitialization, tech, complying with rules in an efficient way. We’re focusing on linking legal to real business issues.”
Deloitte is investing in its legal business across intellectual property, mergers and acquisitions, employment law and technology, Blom added.
Geographically, the business is looking to expand in the UK, US, Asia-Pacific and Germany.
Accounting firms can provide legal-adjacent services to companies in the US, but are currently restricted from practicing law or providing legal advice.
Big Four rival KPMG is seeking a license to operate via an Arizona program that would loosen restrictions on its services. Blom said Deloitte isn’t currently looking at the same approach.
Deloitte Legal acquired UK technology specialist law firm Kemp Little in 2021, adding more than 100 staff members and 29 partners. Since then, a number of legacy Kemp Little lawyers have left the business. Blom declined to comment on the Kemp Little deal.
He said Deloitte would still consider small team acquisitions, but would not pursue larger bolt-ons as part of its legal growth plans.
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