Tax lawyers need in-depth understanding of clients’ business to give good advice – PwC Tax and Legal Services

It is no longer possible for lawyers to give effective tax advice without having a thorough understanding of their clients’ business, says Javier González Carcedo, partner at PwC Tax and Legal Services

“The whole underlying principle in international taxations has clearly moved to the substance issue,” he says. “Therefore, we need to go into the business and understand it because the advice we provide needs to be related to the business, so we have to get involved with it.”
González Carcedo says the service provided by lawyers must now factor in the economics of the client’s business rather than concentrating solely on the law. “We need to move from the law to the business because the fundamental judgement is linked to the facts and circumstances of the business,” he explains. González Carcedo says that clients need their tax advisers to assess the value of the operations they are developing in different jurisdictions. “Lawyers cannot make a good judgement on that [the value] just from the law, it will not explain that, you need to get into the relative relevance of different businesses around the globe,” he adds. Consequently, legal advisers must be able to conduct an “economic analysis” of their client’s business. “It requires an understanding of the economics of the business and you cannot give tax advice any more without a good comprehension of that,” remarks González Carcedo.
Meanwhile, González Carcedo says the Organisation for Economic Co-operation and Development (OECD)’s base erosion and profit sharing (BEPS) initiative resulted in changes in tax regulations in many jurisdictions and this has created “a lot of uncertainty” for clients. “There is no clarity any more about what is the real state of the situation in each jurisdiction,” he adds.