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PwC launches review over Australian tax law leaks
Rear Window
Tom Seymour conducts PwC’s cluster-fiasco
Joe AstonColumnistIn addressing PricewaterhouseCoopers’ raging tax leak scandal, the firm’s chief executive Tom Seymour is now attempting to convey his fourth distinct rendition of events. It is highly irregular and quite gruesome to watch someone assassinate himself by this incremental method.
On Friday afternoon, Seymour started by announcing, internally, “an independent review of the frameworks and practices relating to our governance, culture and accountability”.
PwC’s Peter Collins (left) and Tom Seymour at the tax inquiry in 2015.
He then shifted to qualified contrition. “I have reflected on the previous communications I have provided to you on [this matter] and on reflection these have been technical and legalistic in nature.”
Seymour then confirmed that “there were a number of partners who … remain in senior roles within our firm who were the recipients of emails which highlighted for example the marketing approach and financial success of the tax advice”. He calls it “tax advice”, but it was a proprietary instrument of tax avoidance. Hey, he was reflecting deeply about being legalistic, not euphemistic!
“I am one of these partners,” he continued. “While these emails did not contain breaches of confidentiality, they do demonstrate evidence of the cultural problem at the time. This group of partners first became aware of breaches to confidentiality agreements as part of the regulatory investigation” launched by the Australian Taxation Office in 2018.
Seymour seems to be operating on the absurd premise that leaking confidential government information is a sin but designing, marketing, sharing or being party to a tax avoidance scheme based on that confidential information is totally fine.
Remember, PwC initially set out to perpetrate a grand lie by omission: that there was only one bad apple, disgraced former partner Peter Collins. When that falsehood was publicly contradicted by the Tax Practitioners Board, Seymour minimised this as merely “a perception problem” and insisted “there [were] no findings that 30 [PwC] people got the [leaked] information”. This week, after emails were released proving that 53 PwC people were party to correspondence about the leak, Seymour changed his story. Now, he says that “six to eight” PwC partners were “directly involved” in the leak but have all left the firm, and that another “30 to 40” received the emails but weren’t aware they dealt in leaked information.
None of this works logically. PwC’s tax practice developed innovative tax avoidance schemes before the design or timing of multinational anti-avoidance laws was public. PwC then engaged in highly co-ordinated international marketing of those schemes. When treasurer Joe Hockey unveiled the legislation with the 2015 budget, PwC sent out pitches for its scheme to circumvent the legislation to US clients on budget night!
It is apparent to any rational person that you cannot engage in mass marketing without mass knowledge. Yet Seymour is asking us to believe – and this is the centre of his shifting story – there was never widespread knowledge of the leak among PwC tax partners. They were all just innocent recipients of some emails, which might as well have been spam from a Nigerian prince. They all smoked, but only six to eight of them inhaled.
Unfortunately for Seymour, a critical ingredient of plausible deniability is plausibility, and those PwC partners – himself included – have none. They are global experts in tax law. MAAL was, far and away, the single biggest issue in their professional universe at the time. They all knew Peter Collins was advising Treasury. Where did they think the inputs for their MAAL inoculation schemes were coming from when the legislation still wasn’t public? Tarot cards?
There is also a striking logical incoherence in Seymour saying the emails themselves contained no breaches of confidentiality, that most recipients had no idea about any breach of confidentiality, yet that the emails “demonstrate evidence of the cultural problem at the time”. If those partners truly were oblivious of any breach, then what cultural problem do the emails demonstrate?
Seymour is going around in circles – he’s a whirling dervish, a Catherine wheel of logic. If he just keeps talking, maybe he’ll land on a point that sounds convincing.
Now PwC is calling an inquiry, looking to investigate, drafting terms, and Seymour is talking about accountability like it’s something he can order on Uber Eats. A large serve of accountability, with fries, coming right up.
The irony is that accountability involves people taking responsibility for their own actions but Seymour is actually straining to Wite-Out everyone involved. To date, only three people in this catastrophe have names: Collins, Seymour and retired partner Neil Fuller. More will have to emerge.
They may be nameless but they’re all good people. They are leaders in the community, they belong in polite circles and they sure as hell don’t deserve these appalling inferences when all they did was receive some emails. It was just one bad guy – or six to eight, maybe 30 to 40 or possibly 53 – caught up in a bad system, failed by skewwhiff frameworks, and we simply ought to sprinkle some narrowly defined, unhuman Accountability™ so everyone can keep paying their school fees and skiing in the northern hemisphere. Nobody needs to be shunned for mass marketing tax avoidance schemes. That would jar with their vibe, with their highly inflated senses of self. Tom must prevent this at all costs.
But Tom is imploding before our very eyes, his story falling apart with every new piece of information that comes to light. The clients are panicked. There are 900 supposedly intelligent partners of the firm. It is now a matter of days until the key warlords stand up and say, “You are f---ed mate, just get off the throne you bloody knob. You are doing more damage every time you open your mouth.”
Now it’s budget week and PwC is the naming rights sponsor of the headline fundraising dinners. Seymour has paid top dollar, positioned himself beautifully, done exactly what a skilled influence peddler would do. Then he soused himself in accelerant and took up smoking.
Nobody will be watching Jim Chalmers. They will be looking at the PwC logo on his lectern and whispering among themselves. While Seymour delivers the vote of thanks, someone at his table will mercifully rub Novichok on his fork.
But the show will go on because PwC is embedded. The firm is co-morbid with the Commonwealth, whichever major party is in power. PwC is right now delivering critical contracts, providing government capability long ago denuded from the Australian Public Service.
The right penalty here is for Chalmers to ban the firm from applying for future tenders for a period of time. That would really hurt. Anthony Albanese promised to “change the way that politics operates in this country”. Well, here’s the perfect test.
Read more about the PwC leak
The Tax Practitioners Board has terminated the registration of former PwC partner Peter Collins as a tax agent after a lengthy investigation found he had shared secret information about the government’s tax plans to other partners and staff at PwC, despite signing a series of confidentiality agreements with Treasury from 2013 to 2018.
In May, newly released internal firm emails showed dozens of PwC partners and staff were involved in a plan to exploit, for profit, information Mr Collins had gleaned while advising the government on developing the multinational tax avoidance laws.
Every PwC partner involved in tax leaks should go: Labor senator
KEY POINTS
The Labor senator who helped expose PwC’s tax leaks scandal has called for a clean-out of all partners and staff “actively or passively” involved, and said until then the firm can’t be trusted by the government or corporate clients to keep confidential material secret.
Labor senator Deborah O’Neill said PwC operatives involved in a tax leaks scandal should leave the firm. Alex Ellinghausen
Deborah O’Neill, who chairs parliament’s joint committee on corporations and financial services, said PwC’s leadership appeared not to have grasped the seriousness of the behaviour of dozens of its employees.
“PwC deliberately designed a scheme of theft and deception to cost the Australian people and profit PwC. That fact is not in dispute,” Senator O’Neill said on Sunday, after PwC on Friday said it would hold an independent review but not move for sackings or resignations.
“The question is – can all those involved finally accept that truth and respond appropriately to the nature and scale of the ethical collapse of which they were a part ... Everyone actively or passively involved in the scheme needs to own up to that large-scale moral and professional failure,” Senator O’Neill said.
Her comments come as former senior bureaucrat and now ANU honorary professor, Andrew Podger, said PwC should be banned from receiving contracts from Treasury, or even the entire federal government, until it had reformed.
This builds on calls by Greens senator Barbara Pocock for the firm to be banned from winning government work and for PwC chief executive Tom Seymour to step down. On Sunday, Senator Pocock added that the government should launch its own inquiry into the matter.
Firm in crisis
It is the biggest crisis the consulting firm has faced in Australia and threatens the hundreds of millions of dollars it wins in work from the federal government every year.
PwC’s ongoing preference to treat the matter as a legal argument instead of dealing head-on with the issues raised is now a growing threat to firm’s reputation in the wider consulting and auditing market.
PwC’s Peter Collins (left) and Tom Seymour at the tax inquiry in 2015.
The scandal became public in January, when The Australian Financial Review revealed that the Tax Practitioners Board had terminated the registration of Peter Collins as a tax agent for sharing secret information about the government’s tax plans with other staff at PwC. The TPB also ordered the firm to run additional training about managing conflicts of interest.
Last week, a Senate committee published a cache of internal firm emails that showed dozens of PwC partners and staff were involved in a plan to exploit, for profit, information that Mr Collins had gleaned while advising the government on developing the multinational tax avoidance laws.
On Friday, Mr Seymour held an emergency partner meeting where he confirmed he was one of dozens of partners who received emails related to confidential Treasury information obtained by Mr Collins.
Mr Seymour, who was head of the firm’s tax practice at the time, denied that the information in the emails that he saw contained breaches of confidentiality, but conceded “partners who were in senior roles or remain in senior roles within our firm” had received emails related to the leaks.
Professor Podger told ABC Radio National on Saturday that this “particular case of abuse by the consultant of the trust” was not a common occurrence.
“But when it does occur, there needs to be a penalty and an obvious penalty is to cease to work with that company for some period of time – unless the company is able to show it was absolutely a rogue person and their procedures are right,” he said.
But at this point, the suspicion is that that’s not so, in which [for] case some period, I don’t know how long, PwC should be told they will not get contracts, at least with Treasury and probably not elsewhere.”
Professor Podger is a former secretary to several Commonwealth departments and was also the public service commissioner before he retired in 2005. PwC won $537 million in federal government contracts during the past two years.
Review, inquiry
Treasurer Jim Chalmers has already ordered a report in the tax leaks and what should be done to prevent a reoccurrence and beefed up the power of the TPB by giving the board its own budget and closing loopholes that allowed deregistered tax agents to continue operating.
In addition, an ongoing Senate inquiry into conflicts of interest at firms consulting to the government, which Senator Pocock sits on, is already expected to dig into the details of the tax leaks scandal.
Senator Pocock said on Sunday: “We cannot trust PwC to mark their own homework. Even if they launch their own independent inquiry, how can we have faith in the outcomes given their spectacular failure at being open and honest, so recently?”
“The crisis meeting of PwC partners held last Friday has clearly resulted in a change of tactic at PwC with Seymour finally revealing that he was one of the partners in-the-know,” Senator Pocock said.
“There’s a trail of corruption here that we need to get to the bottom of and while PwC says it will deal with the issues through its own independent inquiry, we clearly can’t trust them to tell us exactly who had knowledge of these actions and who benefited from them.”
In a related development that demonstrates the government’s reliance on consulting firms like PwC, a report released on Saturday revealed the former Coalition government spent close to $21 billion on external contractors and consultants.
Senator O’Neill, a key player in an earlier inquiry into audit quality, said the “current crop of leaders and future leaders at PwC” needed to “publicly reject the cultural practices evident under Mr Seymour’s leadership”.
She said that those involved with the scandal should “walk away from PwC and/or the profession”.
“Failure at this moment for implicated individuals to actively and immediately take on their share of the blame, to make reparation including to walk away from PwC and/or the profession, makes it nigh on impossible for anyone in Government or in business to take seriously PwC’s assurances on anything,” she said.
One thing is for sure: there’s no way anyone in government...or in major corporations can keep doing ‘business as usual’ with PwC.”
Read more about the PwC leak
The Tax Practitioners Board has terminated the registration of former PwC partner Peter Collins as a tax agent after a lengthy investigation found he had shared secret information about the government’s tax plans to other partners and staff at PwC, despite signing a series of confidentiality agreements with Treasury from 2013 to 2018.
In May, newly released internal firm emails showed dozens of PwC partners and staff were involved in a plan to exploit, for profit, information Mr Collins had gleaned while advising the government on developing the multinational tax avoidance laws.
January 2023
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