Top tax expert: Big 4 “accountants of fortune” must be broken up

Rozvany

George Rosvany won’t work as a corporate lobbyist again

In March The Economist magazine rang alarm bells (again) about a rise in concentrated market power: a problem where the biggest firms get ever bigger and more like monopolies, making it easy to extract wealth from the rest of us (as opposed to creating wealth.) This, in turn fosters steeper inequality and poverty and reduces economic growth. As they put it:

“High profits across a whole economy can be a sign of sickness. They can signal the existence of firms more adept at siphoning wealth off than creating it afresh, such as those that exploit monopolies. If companies capture more profits than they can spend, it can lead to a shortfall of demand.”

It is a scary article: though mostly focused on the United States, it touches on a phenomenon that is affecting most countries, where the problem seems to be getting worse, fast.

The accountancy firms, of course, take this problem and inject steroids. It’s not just market power in their own industry that’s a problem: through the tax (and other) shenanigans that they design and market for their multinational clients, they transmit this problem to all other sectors: far beyond their own areas of audit and accountancy. The fact that they have unusually concentrated power in their own market – see below – makes this worse still.

Now Michael West, one of Australia’s best-known tax journalists, is quoting a rare voice of reason and authority: George Rozvany, a former head of tax for Australian multinationals and a former insider at Ernst & Young, PwC and Arthur Andersen. Though he’s Australian, his words are intended to have global relevance:

“Although presenting as “the guardians of commerce” they are unregulated and unaccountable; they have infiltrated governments at every level and should be broken up.
. . .
“The Big Four have, under a Rasputin-like cloak of illusion strayed from their original and critical role of verifying the accuracy of financial accounts for all stakeholders, to be “accountants of fortune” merely representing the accounting position for multinationals and developing aggressive international tax avoidance practices,” he told michaelwest.com.au.”

These four global behemoths, which employ 800,000 people and are expected to enjoy revenues of $130 billion this year, are arguably the greatest vectors for tax injustice the world has ever seen.

So how big is the problem, in terms of market power?

Well, The Economist has a graph showing that the top four firms’ average share of total revenue, with market share rising to shocking levels, nearly 50 percent for technology firms.

Economist monopolies

 

It doesn’t break this down for accountancy and audit. But we do know that in the market for auditing corporations with over $1 billion in annual revenue, the Big Four market share is 98 percent (see also here.)

Ponder that statistic for a moment. Does anyone think this state of affairs is remotely healthy?

Now back to Michael West’s article: Oligarchs of the Treasure Islands. There is a lot more in there to get your teeth into. Such as this, from Rozvany:

“From a regulatory viewpoint, it makes perfect sense to split the accounting and tax functions of each of the Big Four to improve financial integrity and to split each of these firms again into two firms to create competition. International commerce will then have eight international audit firms and eight international tax firms from which to choose.”

Break ’em up. Could this turn into a major global campaign?

And now a call to the Big 4: each and every one of them – can they produce any good arguments why they shouldn’t be broken up?

 


Related Posts

The Offshore Wrapper: the Panama Papers, one year on

Photos from the Protest outside PwC 1 Embankment Place, part of the Global week of action for tax justiceWelcome to the Offshore Wrapper – your weekly update from TJN.  Happy Paniversary! This week it’s been one year since the Panama Papers were leaked, and a number of organisations around the world have been marking the occasion though the global week of action for tax justice. In London, activists from the TJN and the […]

READ MORE →

Protesting PwC: Professionals Without Conscience

Photos from the Protest outside PwC 1 Embankment Place, part of the Global week of action for tax justiceThis week is the global week of action for tax justice and on Wednesday 5th April activists from the Tax Justice Network and Methodists for Tax Justice held a protest outside the London offices of Price Waterhouse Coopers. The global week of action for tax justice is happening one year after the release of the […]

READ MORE →

Germany moves forward on corporate transparency

ReichstagThe Bundesrat has today voted to recommend implementing a public register of the beneficial ownership of companies and trusts.  Great news from Germany, as the country takes an important step forward towards corporate transparency.

READ MORE →

New estimates reveal the extent of tax avoidance by multinationals

Price Waterhouse CoopersNew figures published today by the Tax Justice Network provide a country-level breakdown of the estimated tax losses to profit shifting by multinational companies. Applying a methodology developed by researchers at the International Monetary Fund to an improved dataset, the results indicate global losses of around $500 billion a year. The figures appear in a […]

READ MORE →

Banking Secrecy in China, its related territories and Taiwan

Hong Kong from Sky 100Foreword. The Tax Justice Network is a non partisan network of experts working towards transparency, so we do not take any position about countries’ territorial and political claims. However, we do expect countries with a de jure (legal) or de facto (in practice) influence over other territories, to take responsibility for their power. We point […]

READ MORE →

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top