Law firms beef up tax practices, hold off accountants
In an attempt to offer increasingly demanding clients one-stop shopping for their mergers, acquisitions, buyouts and other corporate transactions, international law firms have set up their own tax practices. The complicated nature of Polish tax law, combined with the increasingly sophisticated nature of transactions done here, has made it crucial for firms to be able to inform their clients of all financial consequences and options. That is difficult to do if a firm does not have tax gurus on board. (See The List, page 14)
"Tax starts before the deal happens," said Tomasz Kacymirow, a partner at law firm Hunton & Williams. "If all the (corporate and tax) lawyers are in the same firm, it is easier to deal with the tax at the very beginning."
In the last year, law firms have been busy shoring up their tax practices, which oftentimes existed on just a limited scale before. While lawyers said that client demands made them do it, they also admit that they are simply trying to protect their business from aggressive accounting firms.
Accounting firms have spent the last two years delving into the legal business, recruiting lawyers and trying to promote themselves as the one-stop deal shop. Now law firms are fighting back.
"Accounting firms made a strategic decision to move in and build legal expertise," Kacymirow said. They "have started absorbing the legal business."
But, Kacymirow said, accounting firms are incapable of offering the same depth and analyses in their legal advice as law firms. The accountants' solutions are simple and straightforward, without really digging in and weighing all of the legal options and possible approaches, he added.
He also questioned the creativity of accountants when it came to solving legal, and tax, conundrums. "Inventions, as far as tax products, have mostly been made by lawyers from law firms," Kacymirow said.
The accountants, naturally, take exception to that assertion. "We are absolutely comparable," Peter De Ruiter, partner in the international tax division of Ernst & Young. "They only focus on legal issues."
To craft the perfect deal, De Ruiter said, all aspects of the legal and financial - especially tax - implications must be sorted through. "Clients need to have all these issues," he said. "It gives them comfort."
Tax mavens moving into law, and lawyers spouting tax advice are a fairly new phenomena in Poland. While the practice has become somewhat common in Western markets, in the early days here, clients were happy to consult their accountants on one issue and their lawyers on another.
But transactions now are more complicated, and clients more fussy. Poland's layers of tax regulations and bureaucracy don't make things any easier, either.
"It is client driven," Micheal Davies, joint managing partner with Allen and Overy Poland, said of the development. "As the tax regime in Poland becomes more sophisticated, the client needs an integrated approach."
The change in the services firms have to offer now compared a few years ago is readily apparent, said Nick Fletcher, managing partner at Clifford Chance. He added that the depth and sophistication of the legal market has increased dramatically since he first came to Poland.
It may be all about the clients, but increasingly it is also becoming about the personnel. One consequence of lawyers setting up tax practices and accountants dabbling in law is that they both require new staff. If the competition for clients is intense, the battle to find good staff in a market with a small pool of qualified labor is fiercer.
"It's a very tight market," said Ernst & Young's De Ruiter.
"Everybody is fishing in the same pond," he said. "And every once in a while you get lucky."
Kacymirow himself is an example of this phenomenon. In January 1997, he left a Big 5 company to start building the tax advisory practice for Hunton & Williams.
The tight market has made poaching rampant, lawyers and accountants said. At the same time, young staff have hopped from one firm to another looking to improve their pay and experience. That has many partners fretting about how to keep their employees from constantly churning.
"I don't think people are that loyal to firms," De Ruiter said. "If they get a chance to improve their position, they easily switch to another firm."
In response, some firms have begun hiring lawyers straight from law school and spending a significant amount of time and money training them. The other option, partners said, is to pick people away from the Polish firms, which typically pay less and offer fewer opportunities for advancement or the possibility of building an international career.
The volatile job market here differs sharply from that of the United States or Western Europe, where lawyers usually stick with one firm and slowly work their way up the ladder. They may go from one big firm to another, but typically they'll work for no more than two firms, De Ruiter said.
"Tax starts before the deal happens," said Tomasz Kacymirow, a partner at law firm Hunton & Williams. "If all the (corporate and tax) lawyers are in the same firm, it is easier to deal with the tax at the very beginning."
In the last year, law firms have been busy shoring up their tax practices, which oftentimes existed on just a limited scale before. While lawyers said that client demands made them do it, they also admit that they are simply trying to protect their business from aggressive accounting firms.
Accounting firms have spent the last two years delving into the legal business, recruiting lawyers and trying to promote themselves as the one-stop deal shop. Now law firms are fighting back.
"Accounting firms made a strategic decision to move in and build legal expertise," Kacymirow said. They "have started absorbing the legal business."
But, Kacymirow said, accounting firms are incapable of offering the same depth and analyses in their legal advice as law firms. The accountants' solutions are simple and straightforward, without really digging in and weighing all of the legal options and possible approaches, he added.
He also questioned the creativity of accountants when it came to solving legal, and tax, conundrums. "Inventions, as far as tax products, have mostly been made by lawyers from law firms," Kacymirow said.
The accountants, naturally, take exception to that assertion. "We are absolutely comparable," Peter De Ruiter, partner in the international tax division of Ernst & Young. "They only focus on legal issues."
To craft the perfect deal, De Ruiter said, all aspects of the legal and financial - especially tax - implications must be sorted through. "Clients need to have all these issues," he said. "It gives them comfort."
Tax mavens moving into law, and lawyers spouting tax advice are a fairly new phenomena in Poland. While the practice has become somewhat common in Western markets, in the early days here, clients were happy to consult their accountants on one issue and their lawyers on another.
But transactions now are more complicated, and clients more fussy. Poland's layers of tax regulations and bureaucracy don't make things any easier, either.
"It is client driven," Micheal Davies, joint managing partner with Allen and Overy Poland, said of the development. "As the tax regime in Poland becomes more sophisticated, the client needs an integrated approach."
The change in the services firms have to offer now compared a few years ago is readily apparent, said Nick Fletcher, managing partner at Clifford Chance. He added that the depth and sophistication of the legal market has increased dramatically since he first came to Poland.
It may be all about the clients, but increasingly it is also becoming about the personnel. One consequence of lawyers setting up tax practices and accountants dabbling in law is that they both require new staff. If the competition for clients is intense, the battle to find good staff in a market with a small pool of qualified labor is fiercer.
"It's a very tight market," said Ernst & Young's De Ruiter.
"Everybody is fishing in the same pond," he said. "And every once in a while you get lucky."
Kacymirow himself is an example of this phenomenon. In January 1997, he left a Big 5 company to start building the tax advisory practice for Hunton & Williams.
The tight market has made poaching rampant, lawyers and accountants said. At the same time, young staff have hopped from one firm to another looking to improve their pay and experience. That has many partners fretting about how to keep their employees from constantly churning.
"I don't think people are that loyal to firms," De Ruiter said. "If they get a chance to improve their position, they easily switch to another firm."
In response, some firms have begun hiring lawyers straight from law school and spending a significant amount of time and money training them. The other option, partners said, is to pick people away from the Polish firms, which typically pay less and offer fewer opportunities for advancement or the possibility of building an international career.
The volatile job market here differs sharply from that of the United States or Western Europe, where lawyers usually stick with one firm and slowly work their way up the ladder. They may go from one big firm to another, but typically they'll work for no more than two firms, De Ruiter said.
