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Twenty-three years ago, Christie’s and Sotheby’s auction houses agreed to pay a fine that today would be worth about $1.2 billion.
For almost two decades the owners, and then other senior executives, agreed to levy identical commissions on the sale of art and other items, making it difficult for sellers to play the houses off against each other.
PwC partner leaked government tax plans to clients
The former head of international tax for PwC Australia, Peter Collins, has been deregistered by the Tax Practitioners Board for dishonesty and for sharing confidential government briefings with PwC partners and clients.
The TPB, which oversees Australia’s 80,000 tax agents, also sanctioned PwC for failing to regulate conflicts of interest by partners and PwC staff, who knew the confidential information would be used to help clients sidestep new tax laws and to attract new clients.
Peter Collins, former international tax leader for PwC Australia, has had his registration as a tax agent terminated.
Mr Collins, also known as Peter-John Collins, was named corporate tax adviser of the year by the Tax Institute of Australia in 2016 and led PwC’s international tax team until he left the firm last October. His registration as a tax agent has been cancelled for two years and he no longer works at PwC.
PwC has been ordered to provide training on a six-monthly basis to relevant partners and staff on how to handle conflicts of interest and to file compliance statements to the TPB twice a year detailing the training and who attended.
The TPB’s decisions came into effect two days before Christmas, but only came to light when it published the reasons for its findings on Friday.
It marks a new low point in the relationship between Australia’s largest accounting firm and the Australian Tax Office and comes as the government continues to use partners from big four firms to advise on how to target international tax avoidance.
Mr Collins was a regular member of consultation groups set up by the Treasury and by the Board of Taxation to provide confidential advice to the government on its Base Erosion Profit Shifting (BEPS) measures to combat international tax avoidance.
The TPB found that Mr Collins shared confidential documents which set out proposed legislation and policy positions with other PwC personnel both in Australia and overseas, “who in turn disclosed [the information] to clients or potential clients”.
“Additionally, internal communications within PwC indicated an awareness amongst the internal PwC recipients, including PwC taxation partners, that the confidential knowledge gained from the consultations with Treasury would be leveraged to market PwC to a new client base,” the TPB reported.
It was also understood that PwC personnel would use the confidential information to modify “the structures of existing clients in a manner that may be perceived to circumvent the intent of the proposed legislation regarding the OECD BEPS provisions”, the TPB said.
“In the circumstances, PwC would have, or should have been, aware of the perceived and actual conflict of interest. This extended to sharing the information with existing clients and potential clients of PwC.”
A PwC spokesman told The Australian Financial Review: “We acknowledge the TPB found that a partner of the firm did not comply with confidentiality agreements in relation to a consultation process with Treasury, which occurred in 2014.
“We also acknowledge that PwC should have had specific conflict management procedures and policies operating at the time to prevent this occurring. In each case this failed the standards we set for PwC and we deeply regret this occurred.”
Mr Collins signed confidentiality agreements with Treasury in December 2013, April 2016 and February 2018, which allowed him wide access to policy deliberations as he advised on Australia’s Multinational Anti-Avoidance Law (MAAL), the Diverted Profits Tax and Hybrid mismatch rules.
This allowed him to shape legislation as part of a consultation committee, and meant he knew in advance what the final form of the new laws would likely be. The TPB report says PwC was able to use the information to prepare ways to minimise their effect.
Senior ATO officers were shocked at the speed with which multinationals set up new structures to avoid the reach of MAAL after it was introduced on January 1, 2016.
By April the ATO was warning that foreign companies and some advisers were already “gaming the system” to avoid MAAL.
In September 2016 Deputy Commissioner Mark Konza had a furious response when he was shown a scheme to avoid MAAL during a visit to a big four accounting firm which was later identified as PwC.
Critical response
He called the scheme “a blatant attempt to undermine the will of parliament” in the MAAL.
“I told them it was a very clever scheme and that cleverness is not a compliment in the tax world, and we would commence an audit of their client as soon as I got back to the office.
“Some firms are saying, ‘We’ve got the MAAL inoculation, come to us’,” Mr Konza said, without nominating which big four firms he meant.
In December that year Mr Collins was co-author of PwC’s critical response to the government’s exposure draft for the proposed diverted profit tax: “While PwC supports the use of principles-based drafting, the current ED is devoid of any ‘coherent principle’ and is likely to lead to the application of DPT in many apparently unintended circumstances as well as a dramatic increase in compliance costs.”
Mr Collins did not respond to questions put to him by the Financial Review.
Confidentiality agreements
“The firm has since reviewed and strengthened its controls, policies and training with respect to conflicts of interest,” a PwC spokesman said.
A PwC source said the documents were shared with a small number of PwC staff, and that the TPB investigation did not find that any client arrangements or structures were impacted in connection with the matter.
Disciplinary rulings by the TPB follow an investigation which can take as long as 12 months, usually after a referral from the tax office. This suggests that the sharing of confidential documents at PwC came to light during an audit by the ATO some time after February 2018, when Mr Collins signed the last of three confidentiality agreements with Treasury.
In this period, relations between the ATO and big four firms were fraught as Commissioner Chris Jordan complained that companies were making blanket claims of legal privilege that prevented the tax office from accessing emails and documents that offered tax advice.
This culminated in a Federal Court judgment last April when Justice Mark Moshinsky quoted emails by PwC partners, including the firm’s current CEO, Tom Seymour, which said that tax advice for Brazil meat giant JBS would be provided by a PwC lawyer, to claim legal privilege. There was no suggestion of breach of confidentiality.
The Tax Practitioners Board has taken a proactive role in overseeing tax professionals under its chairman, Brisbane accountant and businessman Ian Klug and CEO/secretary Michael O’Neill.
TPB rulings are made by its eight-member board, which includes former PwC partners Peter Hogan and Judy Sullivan, former KPMG partner Peter de Cure and the Institute of Public Accountants chief executive Andrew Conway.
PwC has worked widely with Treasury and the tax office to advise on taxation measures.
In 2014 The Australian Financial Reviewrevealed that in 2007 the ATO had become alarmed at burgeoning international tax avoidance, and commissioned PwC Legal (which is a separate legal entity to PwC) to conduct an outside review of the elite ATO unit which handled Advance Pricing Arrangements. This was at the same time as PwC Luxembourg was setting up aggressive tax structures for Australian companies.
Last August a PwC partner, Christina Sahyoun, was seconded to head the Board of Taxation, which advises the government on taxation laws. There is no suggestion that Ms Sahyoun was involved in sharing confidential information.
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