As a result of Covid-19, global demand for tax advisory services contracted by a forecast 9% in 2020. Market revenues now stand at US$33.4bn, down more than US$3bn compared with the previous year, according to a report by Source Global Research.

Size and yearly growth of tax advisory market, 2017–21

The study shows that North America took the biggest share of the market in 2019, with Europe in second place.

Breakdown of global tax advisory market in 2019, by region

The research suggests the Covid crisis has changed the shape of the tax advisory market significantly, with M&A activity and international tax work stalling. M&A-driven tax work contracted by 21% in 2020, reducing total revenues from US$1.6bn to US$1.3bn.

On the other hand, compliance-related tax management fared relatively well throughout the pandemic, despite organisations initially trying to do more of this work in-house. There was only a 5% contraction in revenues on the back of efforts to shore up cash reserves by taking advantage of tax deferrals and other government support schemes.

According to Source Research, its findings suggest the use of tax advisory firms is already increasing as a result of the crisis, most commonly because of a shortage of staff, with employees off ill.

Companies’ reasons for using tax advisory firms as a result of the pandemic

The fact that so many people in finance and tax functions were not able to work, for whatever reason, has made it much harder for organisations to do tax compliance work themselves.