Within a day of announcing the hiring of more than 600 General Electric Co. tax department employees, the vice chair of New York-based PwC (FY15 net revenue of $12.9 billion) received about a dozen calls from clients interested in similar deals.
That’s according to Bloomberg’s BNA, which reported that the arrangement allows GE to reduce its overhead as it sells its financial services units to focus on its core businesses. GE has a five-year contract with PwC to conduct its tax services. PwC can use its new employees on work for other clients. The renewable agreement is effective April 1.
“We’ve built the platform of tax practitioners of GE’s caliber around the world,” Mark Mendola, PwC’s vice chairman and managing partner, told Bloomberg BNA Jan. 13. “We believe other clients will want to build on that.”
The deal reflects a broader trend of companies relying on professional services firms like accounting, consulting and advertising firms, which cost less than hiring in-house staff. But the scale of this deal is larger than any other comparable arrangement Mendola is aware of, he said.
This could be a good idea for large companies that already have close ties with their accounting firm, says Robert Willens, a tax consultant in New York.
“GE is famous for their tax focus and sophistication,” Willens told Bloomberg. “Other companies pay close attention to anything GE does and ask if they should be doing the same thing.”
Pharmaceutical companies and banks, for example, have tax departments that deal with complicated international tax issues, which would make them candidates to follow GE’s lead, Willens says.
PwC is interested in pursuing other similar arrangements, Mendola says. The firm won the GE deal through a competitive bidding process. PwC is now better positioned to advise clients on changes that could result from an overhaul of the U.S. tax code and other worldwide reforms.
“By us adding additional skill sets to a firm – so more transfer pricing people, more international planners – we think the timing is perfect,” Mendola told Bloomberg BNA. “We’re right on the cusp of tax reform, not only here in the U.S. but around the world.”