Can PwC tide over trust crisis as tax leak scandal rages in Australia?
PricewaterhouseCoopers is facing increased scrutiny in Australia amid a Senate inquiry this week into the leaking of sensitive government tax policy to private clients as heads roll at the embattled consultancy giant and a criminal investigation gets under way.
The scandal unfolded earlier this year after the former head of international tax for PwC Australia, Peter-John Collins, was deregistered for sharing confidential government briefings on new tax evasion laws with the company's partners and customers to allegedly help them benefit from the information.
The misconduct has raised questions over ethics at deep-pocket big four firms and the potential for too cosy relationships between governments and their clients.
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PwC, Australia's biggest accounting firm, is now scrambling to salvage its reputation amid a crisis of public trust.
The saga also echoes similar cronyism scandals at other global corporate behemoths, including the 2001 collapse of US energy titan Enron, whose problems were hidden by then big eight auditor Arthur Andersen.
During scheduled Senate hearings on budget spendings held this week, lawmakers grilled the Australian Tax Practitioners Board (TPB), the tax office, and the Australian treasury for failing to protect taxpayer funds and get to the root of the problem known to officials since at least 2018.
The government last week referred the tax scandal to the Australian federal police for a criminal investigation. In 2018, the tax office alerted the police but attempts to seek more information from PwC were stonewalled by the company and investigations stalled.
The tax office first got a whiff of the crisis when several multinationals quickly restructured their businesses in response to Australia's newly enacted tax avoidance laws in late 2015.
Hundreds of pages of redacted PwC emails have since been published and some were read at the briefings, including Collins's comment to partners and staff: "OK in practice until the Australian Tax office (ATO) gets grumpy and figures out the joke".
The scandal also revealed many Australian government departments have million dollar contracts issued to PwC or have close links to the company including the ones tasked to investigate it such as the federal police and the TPB.
Senator Barbara Pocock on Wednesday asked the chair of TPB Peter de Cure how it would "look" to Australian taxpayers that two of its conduct committee members were former PwC partners even though they did not participate in the investigations into PwC.
"Let's not kid ourselves, people out there listening to this know what to look for here. Suspending PwC would be arguably the most consequential sanction that TPB has ever made," Pocock said.
"And you still sit around the boardroom with these two former partners. Do you understand how this looks for the average person out there paying their tax, the TPP is fundamentally compromised?" she asked.
"And doesn't that explain why you've given PwC nothing more than a slap on the wrist?"
TPB, which gave Collins a two-year suspension, told Pocock it wasn't legislated to levy penalties.
Senator Deborah O'Neill also questioned treasury representatives on why it did not alert the relevant ministers when the matter came to light in 2018.
"Were you at that point aware ... that a scheme had been constructed to rob Australians of taxation that multinational companies should pay," said O'Neill, who was subsequently told secrecy laws prevented the treasury department from obtaining more information.
As the controversy ballooned, PwC Australia chief executive Tom Seymour resigned after published emails showed he was one of the recipients of confidential information Collins had leaked. The company also stood down nine partners but have not responded to the demands for their names.
Senators have called for names of about 50 PwC partners and staff - gleaned through the leaked messages - to be made public, but PwC argued that it cannot be assumed everyone who were in the emails were involved in wrongdoing.
Prime Minister Anthony Albanese described what happened as "completely unacceptable."
Treasurer Jim Chalmers on Wednesday once again expressed outrage at PwC's conduct.
"I think the country is absolutely filthy about what's happened with PwC," Chalmers told public broadcaster ABC.
"We want to be able to consult in good faith with the business community on changes that have the capacity to affect them, and people shouldn't monetise that for their own gain."
Observers, however, pinned the blame on ministers and government departments for turning a blind eye to the problem.
"The theatre mounted by Treasury and Finance last week - the shows of outrage and referral to the Australian Federal Police - have been exposed as a confected farce," financial commentator Michael Pascoe wrote in an opinion piece.
Author and analyst Kim Wingerei asked in another comment piece why multinational tax avoidance experts were used to advise the Australian Tax Office.
The scandal also reverberated on social media, with some calling for a blanket ban on PwC while others demanded the firm refund lost tax money.
"Australia is run as a boys' club, operated by overweight middle-aged balding men who are never held to account. The protection they have as a boys' club to operate as criminals is astounding and will no longer be tolerated," said a Twitter user.
This article originally appeared on the South China Morning Post (SCMP).
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