While I was preparing for CLAT, one of my teachers at the coaching had mentioned about the taxation aspect of Mergers & Acquisitions. He also told us about other niches of tax law where one could try his hand and earn the riches. However, I didn’t feel inspired by the idea of learning tax law. It sounds complicated and scary!
However, over time I discovered that while most lawyers are scared of tax law as an obtuse and highly technical subject, it is also the one that perhaps pays the richest dividends.
Let’s get a better understanding of why this is so. I am sure that many of you are wondering if you should become a tax lawyer, and hopefully, this article will help you to make up your mind.
Tax law requires a high level of expertise
There are some areas of law practice you can easily pick up and get done. For example, even if you have never done a divorce matter before, if you accept a client, you will probably get the job done.
That approach doesn’t work with tax. It is a field reserved for experts.
Tax law is one of the most complex and difficult laws to understand and practice. Just look at the fat tax law books. It scares away most lawyers from practicing tax law.
To practice tax law, you need to be a master of interpretation. You need to have a vast number of precedences at your fingertips. You need to be great at court craft. You need to have a great lobby with tax officers. You need to have the patience to pour over heavy financial documents and understand them. You have to be able to conceive of complex tax structures for transactions or defend them in the court.
You may benefit from having knowledge of associated domains such as accounting or audit.
It’s certainly not the easiest area of practice.
Few lawyers dare to enter this domain
Even in law college, you will see that very few people are interested in tax laws. Usually, the subject is kept at the end of the curriculum, typically in the last semester. Passing the paper is a formality and still most dread subjects like income tax law and GST. Most colleges do not even teach GST, customs, or transfer pricing though these are such important concepts.
As a result, only a handful of law students ever venture into the world of tax. Also, people associate tax laws with maths, quite wrongly of course, and think they have to make huge calculations as a tax lawyer all the time! No joke 😀
All these things ensure that tax lawyers are in very short supply. We do not expect that it is going to change anytime soon. So while the market is flooded with M&A and investment lawyers, tax lawyers are few and far between.
Tax law can’t be one of your practice areas, it has to be everything
India is full of lawyers who claim general expertise and will accept any client or assignment they can get. Maybe they are drafting contracts, doing NCLT matters and APTEL matters at the same time. That does not work with tax law at all.
The small minority of lawyers who practice tax law refrain from taking up any other work at all. This is because tax law requires specialization. They do not even practice all of tax law, but super-specialize in something like transfer pricing or GST or customs.
Practicing tax laws is significantly different from any other law practice. Every case is usually unique. This fact is what makes the work of a tax lawyer more interesting as compared to other fields of laws.
Also, given that tax law matters are usually complex and there is a very limited supply of good tax lawyers, pay grade of tax lawyers is usually a notch above lawyers who practice other laws.
Niches make more money than general practices
What should be the most valuable language in the world, let’s say from the perspective of translation? Most people think it would be Chinese, French or Spanish. It makes sense as they are three of the most spoken languages in the world.
However, the number of bilingual people in the world involving these languages are very high, and therefore translators who work with these languages do not command the highest prices for their services.
On the other hand, Norwegian is one of the costliest languages in the world from this perspective. There are many people who speak this language but very few of them speak good English. The number of Norwegian speaking people may be smaller but the talent is even more scarce.
Thus, whenever someone needs an interpreter or translator in Norwegian, the price is much higher than Spanish or French.
The case is similar in many African languages. Africa is very diverse linguistically, and it can be very hard to track down a translator in those languages, making them very expensive.
The situation of the tax law is somewhat similar.
Super specialists in tax law tend to earn far more than generalist lawyers as a thumb rule.
Also, when you focus on any niche, you tend to do better, especially when it comes to law practice. Focussing on a niche increases productivity, depth of knowledge and efficiency within your practice. It also leads to better branding by default, leading to further increments in revenue.
Tax cases are a fewer but high stake
In tax law cases, usually, a huge amount of money is at stake. The amount can run into hundreds or thousands of crores depending on how big the client is. In tax fraud or evasion cases, an accused can even go to jail. Even once you lose, to go for an appeal, you have to first deposit a part of the tax to be paid. This makes losing tax law cases a horrible proposition.
This is why tax law clients are looking for the best lawyers their money can get. They do not want to scrimp on this.
In 2018, Taxmann reported cases which involved famous celebrities and politicians. Sachin Tendulkar, Shilpa Shetty, Shahrukh Khan, Chidambaram family who got favorable rulings while Priyanka Chopra, Rahul Gandhi and Sonia Gandhi got troublesome tax rulings during the year.
There was a case Sushmita Sen v. ACIT, where Sushmita had received a sum of Rs. 145 lakhs from Coca Cola Limited. Out of total sum, she offered to pay tax only on Rs. 50 Lacs and claimed that balance Rs. 95 lakhs were in the form of capital receipt. She claimed that Rs. 95 lakhs represented the compensation received towards damages caused to her reputation.
The Mumbai ITAT held that compensation received by the assessee was not income liable to tax.
Losing the case would not only have been costly but would have also damaged Sushmita’s reputation.
In another case, DCIT v. Shah Rukh Khan, the taxable property was a villa gifted to Shah Rukh in Dubai where it was held by the ITAT that the villa was not liable to be taxed in India.
Believe it or not, such matters are tiny compared to the real big tax cases. Imagine how the lawyers mint money on such cases! But this is so because the lawyer has no room for making errors.
Tax laws are frequently changed
Tax laws are frequently changed. What you knew last month may have become obsolete by now. Hence only those who are continuously engaged can succeed in tax.
In India especially, tax law changes are implemented at an extremely fast rate. In an article by the Economic Times in 2018, they said that “No other country has implemented tax changes as fast as India. Moreover, a Deloitte survey said that India is the second most complex tax jurisdiction.
Add to this, the ever greedy taxman trying every trick in the book and out of the book to collect as much tax as possible. This leads to a lot of disputes.
Take the latest case of angel tax for instance, where taxmen began to issue notices to startups who received investment at a high valuation.
The frequent changes in the law and ever overreaching taxmen ensure exclusivity and a level of mysticism as new grey areas are always arising in tax laws, creating complexity, confusion and opportunities for tax lawyers to earn more.
More opportunities to argue on the position of law or interpretation
Unlike other fields of law, taxation laws are often challenged on constitutional grounds and provide tax lawyers with an avenue to transition into the practice of constitutional law. Since the tax laws are frequently changed, there are always a lot of opportunities to challenge these provisions and tax lawyers look forward to them. Also, there are more such opportunities being created thanks to the aggression of the tax department to meet tax collection targets.
Harish Salve, one of the stalwarts of the law field was the face of the Vodafone case where he had argued for 17 consecutive days on why the deal was not subject to capital gains tax. Harish Salve is considered the best taxation and corporate litigator in India. He started as a tax lawyer and transitioned into all kind of other matters of national importance. He has also represented India in the ongoing matter at ICJ regarding Kulbhushan Jhadav.
India’s greatest lawyer ever, Nani Palkhivala, was a tax lawyer to start with, too!
Lakshmikumaran and Sridharan, ELP, NDA and several other leading firms of today started as a tax law firms, but on the backbone of a lucrative tax law practice, they successfully built other practices as well.
One of the founders of AZB, Ajay Bahl, was a CA and tax expert though he has eventually made a name for himself as a corporate and M&A lawyer too.
This opportunity to build a reputation as a constitutional lawyer or build up other related practices is also a major attraction for practicing tax law.
Tax law rarely gets boring
For one, tax law is huge and there is a lot to learn. It takes a lifetime to master tax law. You are certainly not going to get bored by doing the same kind of matter again and again.
After all, almost every type of transaction or activities that you can do is taxed. Hence, when there are new inventions, new categories of good or service or new categories of activities, tax lawyers get more work.
Almost each and every matter is unique because all of them are concerned with different industries and different aspects of tax law. This makes tax law an extremely wide field.
For example, the introduction of cryptocurrency and wide buying of the same created many taxation questions. When should it be taxed? If I buy one cryptocurrency with another, do I have to pay GST? What if I sell my cryptos? Do I need to pay capital gains tax? Can I adjust any losses from investing in crypto from profits of other income?
Tax laws will keep any lawyer on his or her toes!
You can have an international practice
With growing international trade, there is an opportunity for tax lawyers to serve international clients and Indian clients going international like never before.
Yes, you read it right. There are several aspects of taxation law which involves international entities and also international practice. Let’s take an example. Nishith Desai Associates mention on their website about their international tax and litigation practice.
What are the services they are providing? Take a look.
- Identification of key tax controversy issues at the time of structuring of the transaction.
- Providing strategic guidance for ling potential tax controversies.
- Preparing submissions before the Tax authorities and the administrative appellate authorities.
- Representing clients before the Dispute Resolution Authority for matters relating to international taxation.
- Representing clients before the Authority for Advance Ruling and the Income Tax Appellate Tribunal.
- Representing clients before the High Courts and the Supreme Court of India and briefing senior counsels where required.
Such strategic inputs, especially from the point of view of an international client are very valuable. They do not hesitate to pay big sums for expert services in such issues.
Would you like to be a tax lawyer?
I hope by now you have begun to understand why tax law is so lucrative.
Tax law is not just about making tons of money, it is also a great part of the legal profession and one should be very proud if they succeed as a tax lawyer.
If you are interested in tax law, you will really have to look far beyond the curriculum of law colleges to learn this. The most traditional method is to apprentice in a tax law firm or with a tax lawyer for years, at no salary or a relatively low salary until you can be useful.
At LawSikho, we have created a superior alternative. Learn what tax lawyers take at least 1-2 years to learn under good seniors in 3 months from our highly effective corporate taxation course. A batch has just closed, but there are a few empty seats and we are still taking admission in this course.
If you are interested, let us know in the comments below.