GE's Tax Team Heads to PwC -- 4th Update
January 12 2017 - 7:50PM
Dow Jones News
By Michael Rapoport
PricewaterhouseCoopers and General Electric Co. have agreed to
move GE's in-house global tax team over to PwC as the accounting
firm adds global expertise and the industrial conglomerate
continues slimming down.
PWC will absorb more than 600 employees under the agreement
announced Thursday. GE's tax employees in 42 countries will move to
PwC, where they will provide tax planning, advice, compliance and
other tax services to both GE and other PwC tax clients.
PwC will also take over GE's tax technologies as part of the
five-year renewable agreement.
The unusual deal isn't an acquisition, and no money is changing
hands. PwC expects to benefit from the agreement by enhancing its
operations globally. The firm already has 41,000 global tax
professionals, so adding the GE workers would increase the total by
only about 1.5%.
PwC's tax business had $9.1 billion in revenue in fiscal 2016.
The GE unit, known as Global Enterprise Tax Solutions, could in
time bring in more than $1 billion in a year in revenue to PwC from
GE and other clients, said Mark Mendola, PwC's vice chairman and
U.S. managing partner.
With tax rules changing around the world, and the "great
relationships" that GE's tax professionals have with policy makers
in Washington, Brussels and elsewhere, "we think it's a great
opportunity," Mr. Mendola said in an interview.
GE, meanwhile, expects to benefit by lowering its fixed costs
and simplifying its organization. GE's tax operation is
far-ranging, as the company files more than 5,500 income tax
returns a year in more than 300 jurisdictions world-wide, according
to GE's annual report. Shedding the operation is in line with GE's
push to simplify and streamline itself. The company has cut costs
and moved to sell most of its GE Capital assets in recent
years.
The agreement with PwC allows GE "the flexibility to scale to
the requirements of the changing GE portfolio" even as it provides
the company continued access to the work of its tax professionals,
said Mike Gosk, GE's senior tax counsel. GE is audited by a
different accounting firm, KPMG.
The deal could be a forerunner of other similar agreements. In a
post on the Medium content-sharing platform, Mr. Mendola wrote that
other PwC clients "are contemplating the benefits of following the
GE model of building an external platform that services all their
tax needs."
In fact, he wrote, the same model could work just as well in
such areas as internal audit or data processing. "We increasingly
see clients that want more flexibility in managing their staff," he
wrote.
PwC and GE have been discussing an alliance for more than a
year, Mr. Mendola said. With corporate tax changes in the offing in
the U.S. and the pressures on companies globally to cut costs, PwC
and GE thought that "wouldn't it be cool to do something together,"
he said.
The two companies already have ties. Last September, PwC and GE
announced an alliance to help industrial clients apply digital
technology. Jan Hauser, GE's controller and chief accounting
officer, is a former PwC partner.
The GE employees joining PwC, a mix of accountants, lawyers and
other tax professionals, come from both GE's corporate division and
the company's businesses, including GE Capital. About 20 corporate
tax employees will remain at GE, focused on managing the PwC
relationship among other matters. Another 250 tax employees will
remain to provide tax services in GE's individual business
units.
PwC, which is a global network of private partnerships,
anticipates that some of the new employees will be made PwC
partners, though it's still not clear how many.
Write to Michael Rapoport at Michael.Rapoport@wsj.com
(END) Dow Jones Newswires
January 12, 2017 19:35 ET (00:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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