Global strategy consulting firm McKinsey continues to make significant sums in Australia but avoids paying dues. Latest tax receipts suggest a $440 million take, but big partner bonuses lead to benefits.
The A/NZ arm of McKinsey & Company generated revenues of $440 million in 2021 according to a report from the AFR, with the management consulting firm down 8 percent on 2020 figures amid current talk of large-scale global job cuts.
Citing recent corporate filings, the report however noted a 57 percent increase in bonuses, amounting to $148 million, with the MBB having been previously accused of complex money-shuffling to minimise local tax bills.
According to the filings, McKinsey’s Australia and New Zealand business income dropped from a $37.5 million profit following a bumper 2020 amid the Covid-19 outbreak and recovery to a loss of $22 million in 2021, calculated by the AFR as a reduction in the firm’s tax receipts from $18 million owed to being eligible for benefits in the ballpark of $9 million one year on. Despite recent overtures toward greater transparency, the firm wouldn’t comment on the results.
A report from online publication InnovationAus last year citing CITAR (the Centre for International Corporate Tax Accountability and Research) outlined claims that McKinsey had paid just $1 million in local tax since the 2019 Australian federal election, despite generating $850 million in revenues over the period, much of it via government contracts.
Fellow MBB firm Boston Consulting Group is also said to have previously shifted profits out of Australia, via ‘management fees’.
Confusingly, a later report from CITAR stated that McKinsey had paid “nearly 20-times more tax in 2021.” There is however evidence for a current slow-down in demand for McKinsey’s services in Australia. InnovationAus also reported last year that the firm’s lucrative government contracts had largely dried up (McKinsey was named in a recent report from the Australia National Audit Office as the greatest beneficiary percentage-wise of LNP spending largesse).
The biggest red flags though have been in terms of job reductions, with KPMG for example looking to cut around 2 percent of its local headcount, credited to a stagnant business consulting environment amid economic headwinds.
Bloomberg has since reported that McKinsey is set to slash 4 percent of its roughly 45,000 global staff over the next few weeks, or around 2,000 from the back-office, although it’s unclear if the firm’s Australian headcount will be impacted.
It’s worth noting that the estimated ‘200’ let go from KPMG Australia’s 10,000-strong headcount immediately follows a recent graduate intake of 1,000-plus. For most of the past week, the LinkedIn pages of KPMG’s senior leaders have been lit up with the smiling faces of the young hopefuls who have just commenced their careers with the firm across its various Australian offices.