One minute with Malcolm Joy, lead partner of Frazier & Deeter’s UK advisory practice.
You lead the UK practice of Frazier & Deeter’s new London office. What sets the firm apart?
Frazier & Deeter has become one of the most successful firms in the US based on its focus on building relationships with its clients and also its strong people proposition. Our international structure is unique: rather than being an affiliated network of separate member firms, we operate as a single firm across the UK and the US.
Whilst this kind of structure is commonplace for international law firms, there are no major accounting practices operating in this way. I believe this will give us two competitive advantages. Firstly, our international clients will receive a much more joined up service for UK/US work: they will be dealing with a single firm across two countries rather than getting a referral to a separate firm. Secondly, we don’t need to replicate many of the back-office functions in the UK, which enables us to keep our charge-out rates lower.
If you could make one change to a tax, what would it be?
One of the most frustrating aspects of international taxation for businesses is the inconsistent approach to transfer pricing. The OECD has made great strides forward in recent years – particularly with the BEPS project – in providing clarity on some of the more challenging areas of transfer pricing, but still there are widely different approaches by tax authorities. Intercompany management charges are often subject to excessive challenge and royalty rates can be difficult to sustain. I have a lot of sympathy with countries that feel that the existing databases lack data on local transactions, but the end result is that groups find it hard to achieve certainty on their tax position. Many transfer pricing purists recoil at the idea of any kind of formulary apportionment, but I can see areas where an element of this may be the best answer.
What do you know now that you wish you’d known at the start of your career?
Like many tax practitioners, I started my career focusing heavily on the technical aspects of the role. Of course, you can’t provide good service without staying completely on top of the developments in legislation. However, as you progress in your career you also realise that the relationship with your clients is paramount. You need to build the trust and spend time getting to know your client and their business. Too often the focus is on chargeable hours and recoveries, with little time left for relationship building.
Are there any new rules that are causing a particular problem?
I’m fascinated by the ongoing debate on the taxation of the digitalised economy. It is clear that there is a desire for fundamental changes to the way businesses are taxed on their activities in this area. Politically, it seems that governments are no longer prepared to accept big businesses having significant sales locally but without paying additional taxes. However, there are major differences in the proposals that are being put forward. The apparent competition between the EU and the OECD in racing to put forward their own consultation documents is unhelpful, as is the UK’s unilateral action with the digital services tax. Unsurprisingly, the US has a different perspective on things, as many of the global businesses which will be affected are headquartered there. India and China have strong views on the value of the local market in contributing to the success of a multinational.
It will be a mammoth task to achieve global consensus in this area and it will require creative thinking, as well as pragmatism from the policy makers. This is an area where some kind of apportionment approach will be necessary, and I will be watching developments with great interest.
One minute with Malcolm Joy, lead partner of Frazier & Deeter’s UK advisory practice.
You lead the UK practice of Frazier & Deeter’s new London office. What sets the firm apart?
Frazier & Deeter has become one of the most successful firms in the US based on its focus on building relationships with its clients and also its strong people proposition. Our international structure is unique: rather than being an affiliated network of separate member firms, we operate as a single firm across the UK and the US.
Whilst this kind of structure is commonplace for international law firms, there are no major accounting practices operating in this way. I believe this will give us two competitive advantages. Firstly, our international clients will receive a much more joined up service for UK/US work: they will be dealing with a single firm across two countries rather than getting a referral to a separate firm. Secondly, we don’t need to replicate many of the back-office functions in the UK, which enables us to keep our charge-out rates lower.
If you could make one change to a tax, what would it be?
One of the most frustrating aspects of international taxation for businesses is the inconsistent approach to transfer pricing. The OECD has made great strides forward in recent years – particularly with the BEPS project – in providing clarity on some of the more challenging areas of transfer pricing, but still there are widely different approaches by tax authorities. Intercompany management charges are often subject to excessive challenge and royalty rates can be difficult to sustain. I have a lot of sympathy with countries that feel that the existing databases lack data on local transactions, but the end result is that groups find it hard to achieve certainty on their tax position. Many transfer pricing purists recoil at the idea of any kind of formulary apportionment, but I can see areas where an element of this may be the best answer.
What do you know now that you wish you’d known at the start of your career?
Like many tax practitioners, I started my career focusing heavily on the technical aspects of the role. Of course, you can’t provide good service without staying completely on top of the developments in legislation. However, as you progress in your career you also realise that the relationship with your clients is paramount. You need to build the trust and spend time getting to know your client and their business. Too often the focus is on chargeable hours and recoveries, with little time left for relationship building.
Are there any new rules that are causing a particular problem?
I’m fascinated by the ongoing debate on the taxation of the digitalised economy. It is clear that there is a desire for fundamental changes to the way businesses are taxed on their activities in this area. Politically, it seems that governments are no longer prepared to accept big businesses having significant sales locally but without paying additional taxes. However, there are major differences in the proposals that are being put forward. The apparent competition between the EU and the OECD in racing to put forward their own consultation documents is unhelpful, as is the UK’s unilateral action with the digital services tax. Unsurprisingly, the US has a different perspective on things, as many of the global businesses which will be affected are headquartered there. India and China have strong views on the value of the local market in contributing to the success of a multinational.
It will be a mammoth task to achieve global consensus in this area and it will require creative thinking, as well as pragmatism from the policy makers. This is an area where some kind of apportionment approach will be necessary, and I will be watching developments with great interest.
