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Consultants must offer practical advice to clients, say tax directors

Third-party advisors need to ensure their tax advice is practical and usable, rather than following ‘ivory tower’ theory, and ensure they do not make decisions for their clients, say tax directors.

Third-party advisors do offer a value to tax departments, but tax directors are using them more tactfully.

“Most tax departments don't really have a budget to let a third party advisor just go off and spin their wheels. Those days are gone,” said a global head of tax. “Now it's about using them strategically.”

To ensure advisors are not being used for small tasks, the global head of tax said she encourages her tax team to do their own research on a topic first. This will involve understanding the topic enough to be able to pose a question to the advisor by conveying what the tax professional is dealing with, what they think the answer is, and then ask then advisor if there is anything they are missing or if their interpretation is correct.

“Do some of that initial legwork for them,” the global head of tax said. “It helps us to save money.” 


A more popular approach is business partnering, where the advisors take the time to understand the business, its needs and how the tax department likes to operate. Using this method, the global head of tax said she always challenges her advisors to ensure they give practical advice.

“I can't just deal with the theory. I don’t want ivory tower advice because that's not useful to me because, at the end of the day, we have to deal with our businesses, whether it's the CFO or another business division. I need something practical and I need a practical answer as well as the theoretical answer,” the global head of tax said.

However, while tax departments want answers from their advisors, some prefer to not have the decisions made for them.

“I always want to be the one to make a call on the risk,” said the global head of tax. “One pet peeve with third-party advisors is [having to ensure] that they do not make the decision for me. Tell me what my options are, tell me what the pros and cons are, but let me be the one to make the decision.”

Similarly, the managing director of tax at a private equity company said her previous experience as a tax advisor taught her how to use them more effectively and build a partnership.

“When I worked [as an advisor] clients would throw data over the wall and say, 'get me the answer,' but you could not make sense of the data because it was so unique to the client and you end up going back and forth so many times just to make sense of the information,” she explained.

So when moving to an in-house role, her moto became ‘let's make us successful’. “By 'us' I don’t mean the client versus the advisor, but all of us working together,” the managing director explained. However, she said it is still important to make sure the tax function is in control.

This focus on partnering has also changed the way some tax advisors operate too.

“For us, it's about getting more creative, looking at how we structure our fees, how we're having those conversations with clients, and thinking outside the box to see how we can do the work for you within your budgetary parameters,” said a tax partner from an international law firm.

“We're finding a lot [of the change in the way tax functions operate and view efficiencies] leads to conversations on, for example, how the tax department can get more freedom on fees, or how the service provider can deliver more value,” said the tax partner.

“As a business advisor, I need to know everything about a business and I need to know the pressure points,” she continued.

As tax departments change the way they operate, often with smaller budgets, tax advisors have to adapt to ensure they are offering a valuable service that complements the expertise within a tax function. Tax directors are quick to notice those advisors that give theoretical, rather than practical, advice and will find that they are being cut off by their clients who prefer a real-life approach.

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