We advise companies to be disruptive, says Deloitte chief David Cruickshankgbs17
Deloitte’s recent investments in strengthening its advisory business in India are part of the professional services firm’s global strategy, said its chairman David Cruickshank, who was in India to address the Global Business Summit. In an interview to ET’s Anumeha Chaturvedi, Sachin Dave and Vinod Mahanta, he spoke about audit rotation, changing global tax regime, GST and outsourcing in the time of US President Trump. Edited excerpts:
Deloitte has recently hired hundreds of people in its advisory business in India. Is the firm moving away from an audit heavy business model in the country to one more focused on consulting?
Our strategy is very clear – to have strong businesses in each of our five areas – audit and assurance, tax and in some countries legal, consulting, risk advisory and financial advisory. In some parts of the world growing auditing is a challenge, like in the Netherlands. In Spain and in India we have been growing advisory side. Our intention is to be strong in each of our segments around the world, and in all the important markets, and India is obviously an important market. So, if you look at it from that perspective, it’s not very surprising and it’s an obvious thing to do. But the shift has been very dramatic over the last one year (in India).
Is Deloitte global bankrolling the firm’s growth?
Two years ago we spent a huge amount of time on restating our strategy and what we want to do around the world, and then we had a new leadership team in place – I became chairman and Punit Renjen became CEO. In 2015 we started making sure that the strategy was executed in all the big markets. So what India is doing is very much part of the global strategy. Just about every member firm is investing in advisory. In Deloitte system, each member firm takes the responsibility of making the investments and over a period gets the support of the rest of the firms. We are investing in consulting capabilities in about 10 countries. Yes, there is technology and other (investments).
In India some local firms have raised the issue of market concentration among the Big Four and demanded joint audits. Will it improve quality and diversify the market?
The role of audit is to provide assurance of financial data for capital markets and you need to look at the quality. Is there any evidence that joint audits would assist that? I don’t think there is. If you’re looking at audited financial statements for very complex organisations, a single audit is better. At the moment, wherever we are competing for audit rotation, it feels intensely competitive. Every single audit in Europe has been fought over fiercely.
How should India go about implementing goods and services tax?
It is about making sure the systems are working, the codifications are working. The corporate sector has to be involved to test that before all the buttons are pushed. They will be a very good mirror for the government to check whether the system is ready. Trying and testing things with them would be the first thing I would do. Whenever you’re moving to something as dramatic as a countrywide GST, stuff is bound to be rough around the edges in the early days. But as long as there’s a clear mechanism for sorting out and for learning from those I think that’s not a problem. Personally, I think it’s a fantastic achievement to move to a statewide GST. China managed it last year and got everything up and running. It’s one of the lowest cost ways of raising revenue. It brings so many people into the formality of the tax system because they get used to filing and keeping records, and doing things in a proper way. In a relative sense it is easy to apply.
But some say India has made GST complex…
Every country has a slightly different interpretation. I wouldn’t say India is special. There’s always politics and issues involved in the execution and it does get reformed. If you look around the world it’s the most effective usage tax with simplicity of application, predictability of revenue and ease of operations.
Will the changes in tax regulations impact, and even change, global businesses?
Tax has to be built into the decision-making processes. Tax structures that don’t reflect the commercial positions of companies won’t survive scrutiny. It means tax professionals in companies need to be involved in commercial transactions in the early stage to understand and give advice on the group’s tax position. Tax can’t be left to the end of the year. It needs to be a lot more proactive.
How do you view measures such as thin capitalisation proposed in India’s last budget to tackle base erosion and profit shifting (BEPS)?
I think India is right in the middle of the pack there. Other countries also implemented some of the other BEPS measures. Other countries have been using BEPS style analysis in looking retrospectively on tax audits. Most countries are doing it on a bit by bit basis.
Audit business faces a big tech-driven disruption. How is Deloitte preparing for this change?
We advise companies to be disruptive. So we help companies digitise. Our business itself is prone to disruption. It’s a big data business, so can you have better data analytics and better insights, and we have invested a lot in that. Have we done enough? Hope so. Will we have to do more? Certainly. The other trend is general automation and analytics around other parts of our business. There’s hardly any practice that is not being affected or being disrupted in some way. The pace of business change is the greatest that I can remember.
US President Donald Trump has been critical of outsourcing. Deloitte also outsources a lot of work to India. Will that change?
I don’t think the trends of globalisation will change. If anything, they have carried on. Forces of globalisation are still there. You do things in places where they can be done best.