GE Plans Giant Tax Trade to Send More Than 600 to Accounting Firm--Update
January 12 2017 - 11:58AM
Dow Jones News
By Michael Rapoport
PricewaterhouseCoopers plans to hire more than 600 employees
from General Electric Co.'s tax team as the accounting firm adds
global expertise and the industrial conglomerate continues slimming
down.
The Big Four auditing firm and the industrial company have
agreed to move GE's in-house global tax team over to PwC. Under the
agreement, which was 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 -- 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 overhauls happening around the
world, and the "great relationships with policy makers" that GE's
tax professionals have, "we think it's a great opportunity," he
said.
GE, meanwhile, expects to benefit from lowering its fixed costs
and simplifying its organization. GE's tax operation is far-ranging
-- 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.
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 "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.
Write to Michael Rapoport at Michael.Rapoport@wsj.com
(END) Dow Jones Newswires
January 12, 2017 11:43 ET (16:43 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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