Tuesday, May 21, 2013

What Happens When You Quit the Maw of the Accounting Firms? It Depends on Tax Codes...


I was struck by an article in The Lawyer based on its annual European 100. (Don't rush, it costs nearly £600.)

The two top European law firms are Garrigues in Spain and FIDAL in France. Both law firms posted revenues of over €300m. Apart from that law firms in most of Europe face the same difficulties as elsewhere with declining partnerships, frozen hiring, etc.

What is of interest here is that both firms were hooked into accounting firms for a long time. FIDAL was part of KPMG and was essentially a tax practice. Tax is still a big part of its remit now. FIDAL left the KPMG network in 2002 and became independent. Some of KPMG's literature still shows a strong connection between the two.

It would be fair to say that prior to 2002 FIDAL was not awarded much distinction as a law firm, French or otherwise, but since then it appears to have thrived. It is a French firm with no international offices.

With Garrigues it was different. The firm always had a reputation as being a key Spanish law firm but in 1997 it merged with Arthur Andersen. This both shocked the legal world--why would a successful firm merge with a giant squid of a global accounting firm?--and then surprised them more when it went on to be successful in the merger. According to Garrigues' history its billing rose 130% and headcount doubled from 500 to 1,000. Clearly 2002 was a fateful year as Enron killed Arthur Andersen and Garrigues reverted to being a law firm alone again.

One enlightening item in the Garrigues history, tucked away, is that in 2005 it established a network of tax firms. It also internationalized in a big way--Latin America and Asia.

Certainly there is life--robust at that--after quitting the maw of the giant accounting firms. Both Garrigues and FIDAL prove that. But perhaps the crucial element is tax. Both are major players in tax advice across borders. They have invested huge resources in this area.

After attending the Tax and Reputation Conference at KCL yesterday, I've come to see just how important tax advice is for companies. Add to this the US Senate Permanent Subcommittee on Investigations accusing Apple of avoiding billions of dollars in tax by offshoring itself to Ireland (Apple's response here), the UK Public Accounts Committee taking Google, Amazon and Starbucks to task over unethically limiting its UK tax exposure, and we see that tax planning is at the core of business transactions. As cross-border business multiplies, the demands for tax accountants and lawyers grows considerably. Both the UK and the US have made corporate tax so complex that it is hard for any but an expert to understand and interpret the codes. It's a goldmine for "creative compliance".

So both Garrigues and FIDAL benefit from our desire to make the world a complicated and complex place. "Zen and the Art of Tax Planning" won't be appearing on Amazon yet, but if it did I'm sure they would donate free copies to Margaret Hodge and her colleagues on the Public Accounts Committee.


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Tuesday, May 14, 2013

London in Colour in 1927!




Wonderful little film of London in 1927 filmed in colour. You can't help being struck by how black London was--the buildings are filthy but then how much smoke was being belched into the air. There were, as it says, 4,000 buses charging around.

The contrast between the well-dressed spaciousness of the West End compared to the congestion of the East End is stark. If the camera man had gone further east than Petticoat Lane, I'm sure it would have been worse.

A real little gem!



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Sunday, May 12, 2013

The Transformation of Irish Legal Services


The picture above is from an Irish crime TV show about a journalist chasing stories of corruption, paedophilia, societal neglect and more. Within the throes of the recession Ireland is going through deep changes. The press is full of corruption scandals, billionaires going bankrupt, and, not least, the Irish legal profession facing its biggest ever challenges.

Two years ago I went to Dublin to speak at a conference about the new Irish Legal Services Bill proposed by the Troika. For the Irish legal profession it was dire. Last week I was back in Dublin at UCD to talk again about the Irish Legal Services Bill. We're not quite there yet.

The Bill is expected to be passed into law later this year. In the ensuing two years there has been much discussion between the Justice minister and the profession with some give and take on both sides. Fundamentally there will be a single external regulator, the majority of which will be non-lawyer with the authority to deal with more or less everything to do with lawyers.

To say the Irish legal profession is still in denial would be true although there is more acceptance than there was two years ago. When I talked about the changes happening in the UK with increasing numbers of alternative business structures, more consolidation in the personal injury sector, take overs of law firms, Co-op growing by 3,000, and to cap it with a picture of Eddie Stobart's trucks (but no barristers with his logo) there was fear.

As one barrister put it "A country the size of Birmingham's population spread over the geographical area of Scotland has a tiny profession which can't afford to disappear." He was concerned about the Bar. A Law Society representative wondered about lawyers in rural areas who could go out of business leaving people without access to lawyers. Having Richard Susskind on hand to talk about technology helped there, I think...

When the act comes into law, it will be interesting to see who is appointed to the regulatory authority and what they do. One of their roles, like the Legal Services Board, is to do research on legal services. I applaud that because it's necessary.

More can be read about the conference here in the Irish Independent newspaper.

As I've said before, let a thousand flowers bloom for Ireland is about to go through a Maoist revolution.





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