The work that Saila Stausholm and I have undertaken on the Big Four firms of accountants and auditors has sought to establish a number of things about them given the opacity hat surrounds their operations. One of these things was precisely where they are. You would think this should have been straightforward, but it was not. The firms seem to find it quite hard to publish accurate lists of where they are located, although PWC got pretty close. Having established what we thought were correct lists we located these firms on a world map. As is clear, the overwhelming majority of countries in the world have at least three out of the four firms present, and all four are present in most countries.
Mere presence in a location can, however, be misleading so the next map shows the number of offices by location:
The disparity between the two maps makes clear that the Big Four only have a limited presence in many of the lower-income countries in the world.
To further illustrate this point the next chart shows the top 25 countries in terms of the number of offices operated by the Big Four in aggregate. The USA tops this list and, as is clear, with the exception of Malaysia, the jurisdictions where the Big Four have most offices are in the OECD and BRICS countries:
It may be unsurprising that the Big Four are heavily represented in the largest economies and that their presence in many of the world's poorest jurisdictions is limited but their over-representation in Nordic counties requires explanation. In these countries, alone in the world it seems, these firms provide services to the entire business community, whatever its size, and as such are located in many towns as well as major cities. So strong is this trend that the Big Four firms have 23 offices between them in Iceland, a country of just 336,000 people.
What this chart does suggest on first glance is that the presence of the Big Four firms is directly linked to the size of the market in the place in which they operate. To test whether is the case we compared the number of offices to market size measured in terms of population and GDP. The evidence that emerged was clear: the number of offices the Big Four operate in a jurisdiction is not proportional to the size of a country or its economy. The next chart shows the number of Big Four offices in a jurisdiction per head of population:
With the exception of the Nordic states, for which explanation has already been offered, the presence of secrecy jurisdictions in this list is its most obvious characteristic. The implication is clear - the Big Four firms are heavily over-represented in these locations in proportion to apparent local market size.
The same trend was apparent when we compared office presence with GDP with the exception that, Iceland apart, the Nordic countries disappeared from the list and secrecy jurisdictions became even more prominent:
From these results it is apparent that the Big Four are heavily over-represented in secrecy jurisdictions, as compared to what could be expected from relying on GDP or population figures. This suggests that their presence in these places is related to the secrecy for transactions that these jurisdictions provide.
That, of course, may not be surprising, but it's good to have confirmed it.
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Somebody wrote a book recently about tax havens/secrecy jurisdictions and fingered the big 4’s presence in so many of them. Just trying to remember who it was…..oh, wait…
Didn’t you try to make a point about this before a few years ago and didn’t someone point out that the number of offices was misleading and it was the number of staff that was more relevant? 5 people in each of three offices does not suggest a higher involvement than 500 people in one office.
And in Sweden and Norway wasn’t the historical pattern that the big four had taken over firms that had small scattered offices as suited the population of those countries?
Or are you criticising the big 4 for not consolidating their offices in Sweden and Norway whilst criticising HMRC for consolidating here?
When you set your mind to criticising someone you always seem to to find something, anything to use for innuendo and muck throwing. I can just imagine you witnessing Jesus walking on water and writing a blog on how he obviously can’t swim.
Last time you tried to make this point about the big 4 it was obvious there was much hot air and little substance to the criticism.
Have you forgotten your earlier blog or are you just hoping we have?
Why not read the report instead of wholly missing the point?
Barry, which of the Big 4 do you work for or paid by?
Secrecy Jurisdictions – what have they got to hide? Billions, it seems. There are at least 3 parties, other than the jurisdictions themselves, involved in hiding money & other assets from prying eyes: the party with the money, supine governments who allow it to happen, and professionals who create the opaque structures, often at multiple levels of complexity. Do these parties with the money pay their fair share of taxes in their usual place of residence or where their economic activity actually takes place; do they pay taxes at all or are they evading their liability; are the funds legitimate? Do the professionals who facilitate stashing the loot know the answer to these and other important questions? Do they care?
Read my book…
I think you have already referred to it this morning
Number of offices is misleading. For some strange historical reason (possibly geography) pwc Sweden had numerous offices with 2 or 3 people providing book keeping services to the local businesses I think they are in the process of consolidating them for obvious reasons
I note this in the report and make clear it is an outlier
So, that is not an objection
Sir, my Company Law lecturer once said that Malaysia is a “Little England”. I, at that point, failed to make the connection. Now, however, that statement is too true. Whatever problems that the UK/England are having, we are having it too. One problem that is going erupt very soon is the housing crisis. It is not bad enough but I think we will get there in a few years if left unchecked. In terms of the philosophical foundation of understanding the economy, I’d say Malaysia is still conservative but again in a few years time, we could be a copy of UK/England. The problem here is that nobody knows how to give the problem a name, unless one follows/read alternative economic theories. Or in my case, Scottish independence movement.
Therefore I am not too surprised to see Malaysia is in the list.
Yes and our great institute, jokingly charged with the responsibility of regulating chartered accountants, the ICAEW, continues to oversee these matters. It disciplines the small practioners, for small mis demeanours and completely misses the big firms who are the ones that make the big cockups. The ICAEW should be leading the debate on these matters and also generally on reforming the excesses of capitalism. But it has nothing to say. Great shame.
Why no Switzerlabd in the last two tables….and no Liechtenstein in the last one?
Because the data did not out them there
In the interests of transparency, is your underlying data available to the public?
For example, what is the number of Big 4 offices in the each of the jurisdictions listed in your two “top 25” lists?
Not as yet, because there are iterations to go as yet and so we are not releasing it until all our research is complete
Then it will be published
OK. Understood. But perhaps I could try to reverse engineer this.
Your diagram indicates that the Big 4 have about 220 offices in Sweden, which has a population of about 8 million, so one office for 36,000 people, and 1/36,000 equals 0.003%. That seems to accord with your bar chart.
The population of Bonaire is about 19,000. If Bonnaire had the same number of Big 4 offices (per person) as Sweden, it would have half an office (19/36). You can’t have half an office; but if it has just one office, the percentage would be about 0.006%, twice that for Sweden. The number from your bar chart for Bonnaire appears to be roughly four times that, about 0.02%, so would that be about 4 offices, one for each of the Big 4? (I assume the second 0.02 on the x-axis is meant to be 0.025?)
The population of BVI is 28,000. 4 offices divided by 28,000 population is 0.014%. That looks about right on the bar chart.
The population of Sint Maartin is about 34,000, about twice that of Bonnaire, and its number appears to be about 0.01%, roughly 3 (or 4) / 34,000.
The population of Gibraltar is 29,000, Monaco is 36,000 …
Is it the case that there are single numbers of Big 4 offices in each of these jurisdictions, possibly no more than one per firm? Are you suggesting that the Big 4 firms are “heavily over-represented” by having just one office in each of these places?
The data is all accurate
And yes of course the Big Four is heavily over represented by having just one office in these places where there is very obviously no local accounting need to justify it. If populations of their size needed a Big 4 office the Isle of Wight should have several. Oddly, it has none.
OK, fine, so you *are* saying that one office per Big 4 firm in a small jurisdiction is too much. That is clear.
I suspect the Big 4 service their clients on the Isle of Wight (population about 140,000) from their offices in Southampton, a short ferry ride away. Where would the nearest office to BVI be, if the ones in BVI were closed? Venezuela?
(For what it is worth, I am sure the Big 4 have a lot to answer for, but I’m not convinced the right approach is to spend time arguing that the single office each Big 4 firm has in say BVI should be closed.)
Tell me why any Big 4 firm needs an office in the BVI?
I’ll pass this interesting blog to my now ex MP Roger Mullin, he’ll find that interesting. He was uncovering money-laundering via SLPs and had been in touch with Philip Hammond about it just before the last GE, he had a 10k majority safe seat but somehow lost seat..hmmmmm.
I’m sure he is not missed in Westminster by the Tory party but the UK is missing a very principled, honest, intelligent man with great integrity from Parliament, where there is often seen, a den of Westminster snakes.
Agreed