Corporate Tax Services
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

Global Market Outlook on Corporate Tax Services

The global tax industry is expected to witness a 4-5 percent increase in billing rates in 2018. The Americas is expected to have higher growth in billing rate (~4 percent) vis-à-vis Europe (~3 percent) and Asia Pacific (~3.5 percent).

The global tax industry was valued at ~ $54 billion in 2017, out of which more than 30 billion was contributed solely by the Big Four firms. The industry is expected to grow at a CAGR of ~6-6.5 percent between 2015 and 2020.

Indicative Global Tax Industry Market Size

• Industry Growth: The global tax industry is expected to grow at CAGR of ~6.15 percent between 2015 and 2020
• Tax Revenue (FY 2016/17): Tax services revenue for global accounting firms increased by ~8 percent
• Tax Industry Growth Drivers: Tax services demand related to OECD BEPS reforms, Brexit, transfer-pricing, cross-border transactions; and other tax services related to mobility and compliance.

Market Share of Top Accounting Firms for Tax Services(2017) 

• Engagement with Big Four: Big Four are the preferred choice of Fortune 500 companies for procuring tax compliance and advisory services
• Engagement with non-Big Four Firms: Buyers are facing pressure to achieve cost optimization in compliance spending. Non-Big Four are gaining market share due to homogeneous nature of tax services
• Non-Big Four Preferred Suppliers: BDO, Grant Thornton, Crowe Horwath, and RSM provide equivalent service at reduced rates.

Tax Services Industry Statistics-US

US accounting industry's growth is primarily fueled by advisory and consulting services. Big four hold ~ 45 percent market share of the US tax services industry.

US tax services industry was valued at ~ $30 billion in 2017, out of which more than 14 billion was contributed solely by the Big Four firms. US tax industry is expected to grow at a CAGR of ~ 6 percent between 2015 and 2019.

US Tax Industry Characteristics

• 40% revenues of US tax industry is contributed by tax compliance & processing services; and remaining 60% is contributed by tax advisory services
• The compliance services are usually priced as per, fixed fee or negotiated fee model, owing to its transactional nature.  The advisory services, due to their strategic nature, are usually priced according to service hour rates
• Buyer organizations use Tax KPIs to manage tax costs( and associated risks) and to measure efficiency of tax processes; which could later translate into savings on direct and indirect tax costs.

Growth Drivers and Constraints - Global & US

Big four* hold 40-50 percent market share of the US accounting and tax industry. Big four companies are a preferred choice of most Fortune 500/S&P 500 companies because of absence of scaled competition, their industry experience and goodwill.

Drivers

• Increased Merger & acquisitions(M&As), US economic growth, rising equity & financial markets, growing number of new businesses in US, rise in IPO and Joint Venture Activity
• Tax Services industry growth is primary fueled by MNC's demand for the following services: OECD BEPS CbCR requirements, Brexit, US Tax Reform, international tax, State & Local Tax(SALT), GST Implementation by Indian tax authorities, VAT implementation by Gulf Cooperation Council(GCC) and Transfer Pricing Requirements
• Tax services quality improvement through technology, innovation and digital tools implementation
• Higher private investments, tightening regulations, VAT changes
• Industries such as manufacturing, construction, real estate and technology; are drivers of demand for tax services in US.

Constraints

• Shortage of quality and qualified personnel/consultants in tax services industry
• Challenges associated with recruitment and retention of top talent in the industry
• Mid-tier suppliers are experiencing downward pressure on their fee income. Firm consolidation(M&As among mid tier accounting firms) and aim for client market capture(from other accounting firms) are reasons thereof
• Falling staff productivity levels due to automation- Although, automation has expedited work, but tax services firms are unable to use this additional capacity
• Large organizations are setting up in-house consulting groups and recruiting former consultants into management positions, thereby reducing the usage of external consultants(for tax advisory).