Thanks to the TaxProf Blog for the pointer to this paper–“The Coming Accounting Revolution: Offshore Outsourcing of Tax Return Preparation” by Jesse Robertson, Dan Stone Ph. D., Liza Niederwanger, Matthew Grocki, Erica Martin, and Ed Smith. The paper starts out as follows:
Although controversial and in its infancy, the overseas outsourcing of business processes is increasingly common in service industries such as banking, financial services, retailing, insurance and telecommunications. Economists and accounting professionals expect this trend to accelerate. For example, Deloitte Consulting LLP forecasts that 2 million financial services industry jobs will relocate overseas during the next few years (E-Business Strategies). Many larger CPA firms have begun shifting tax compliance work overseas, through outsourcing facilitators, to Charted Accountants (CAs) in India. The overseas outsourcing of tax compliance work enables CPAs to focus on higher margin services such as tax consulting, reduces labor costs, and increases the speed of tax return processing (eAccounting Advisor). With the potential dual benefits of cost savings and expanded higher margin services, we expect that CPA firms will increasingly outsource compliance tax services.
The authors note that “a staff accountant earning an annual salary of $45,000 (plus 20% of salary in benefits) costs a firm about $39 per billable hour, assuming 1,400 billable hours per year” whereas outsourcing through a facilitator “can be expected to result in tax preparation costs of about $20 per billable hour.” (Please note the “20% of salary in benefits” part of that equation.)
While the authors point out the reasons for the trend and the different concerns which abound in this practice, the paper doesn’t go into how clients are faring with this process. Judging from my own frustrating experiences recently in dealing with the overseas call center of a major software company, I have serious doubts about whether this trend will, in the end, be very good for clients. (See previous post here on the topic of outsourcing of legal services.)