Global Tax 50 2017: The GE/PwC outsourcing deal
The GE/PwC outsourcing deal is a new entry this year
The deal to integrate the tax department of US multinational General Electric (GE) with PwC in a new global tax division was a major event in 2017. It was the first deal of its kind, with GE transferring its world-class tax team to the Big 4 firm.
Under this five-year deal, PwC hired more than 600 accountants, lawyers and tax advisers covering 42 different jurisdictions from GE's tax department to establish a new global solutions team to oversee the company's tax affairs.
But this is not to say that GE has outsourced its entire tax department.
A streamlined team of 20 corporate tax professionals remained with GE to manage the new set up, with a further 250 tax employees staying to provide services to GE's many business units. This arrangement came into effect on April 1 2017 and will likely be renewed on a five-year basis.
Before the deal, GE's tax team was known as the "Harvard of tax departments", whereas PwC had the one of the largest tax practices globally with an international network of 41,000 tax professionals across 157 countries.
"The calibre of talent joining our firm from GE is remarkable," Mark Mendola, PwC vice chairman and managing partner, said at the time. "This arrangement will enable us to continue providing our clients with the very best tax services in an increasingly volatile and uncertain environment."
"The agreement allows us continued access to the world-class expertise of global leaders along with the flexibility to scale to the requirements of the changing GE portfolio," Mike Gosk, GE vice president and senior tax counsel, said.
"Integrating GE's talent with PwC's broad capabilities will allow us to deliver upon the tax function of the future in an increasingly digitally enabled world," Mendola added.
The GE-PwC merger sets a bold new precedent for the relationship between big business and law firms. It has been described as a hybrid model where the company gets a team they know and can trust, supplemented by the capacities of a Big 4 firm.
The benefits of the arrangement are significant. PwC's tax business could increase its annual revenue of $9.1 billion to more than $10 billion as its global solutions team can serve GE as part of its diverse client base, according to the Wall Street Journal. Not only does the firm expand its resources in terms of tax professionals, PwC has gained the technology wing of GE's tax department.
With the rise of demand for data as a fixed commodity, PwC is looking to hone in on the firm's digital strategy in its use of analytics and automated services for finance and tax processes. This is a major focus for all the Big 4 as they look towards the future.
This landmark deal may see more corporations outsourcing their tax teams.
The Global Tax 50 2017
The top 10 • Ranked in order of influence
6. Arun Jaitley
The remaining 40 • In alphabetic order