PwC faces fresh probe into its tax leaks scandal
The regulator that uncovered the PwC tax leaks scandal has launched a new inquiry into the role of the dozens of people who received emails sharing confidential government information to win clients.
The scandal continued to dominate Canberra on Wednesday when RBA governor Philip Lowe said the bank would no longer use the firm and prudential regulator John Lonsdale disclosed the major banks had been asked if PwC had approached them with any government secrets.
Prime Minister Anthony Albanese told question time the leaking of confidential tax information by former PwC partner Peter Collins was deeply troubling and an “absolute scandal”, but he stopped short of promising to refer the matter to the new National Anti-Corruption Commission. The NSW upper house also called an inquiry into the management of consulting services.
In January, the Tax Practitioners Board, which regulates the country’s tax agents, terminated the registration of Mr Collins for sharing confidential information about the government’s tax plans with other partners and staff at PwC, and ordered the firm to run additional training about managing conflicts of interest.
Tax Practitioners Board chief executive Michael O’Neill told Senate estimates in Canberra on Wednesday the agency has now launched a second review into the tax leaks matter.
Mr O’Neill said the regulator was trawling through thousands of internal PwC emails to compile a definitive list of personnel in Australia and internationally who are mentioned in documents related to the use of confidential information, as part of the new investigation.
“We are now looking at further inquiries that have a broader base than the first investigation,” Mr O’Neill said. We can’t be more definitive because there are thousands of documents we’re looking at.
“The mere fact that a name appears in the documentation doesn’t mean that that person had any knowledge of what Mr Collins did, or indeed any involvement in the [related] issues.”
He said the next step would be for the TPB to “go to various sources and say ‘what does this list mean?‘”
“For the majority of people on that list we have very little or no information have no information about what they knew at the relevant time, in relation to Mr Collins’ affairs. So, we can’t conclude definitively one way or the other.”
The fallout from the matter has already effectively cut PwC off from future Commonwealth work.
In Question Time, the Prime Minister noted that the Australian Federal Police is already investigating the matter. “These revelations are indeed shocking, but they do point towards a policy failure as well and that is what the government is addressing.”
‘We’re as appalled as you are’
RBA governor Dr Lowe told estimates that PwC would be cut off until it responds in a satisfactory way to the scandal.
“We’re as appalled as you are. The use of private information of this sort for commercial gain is wrong. It destroys trust, as you know, it’s unacceptable. And from our perspective...it should come with very serious consequences,” he said.
“[W]e’ve taken the decision to enter no new contracts with PwC until a satisfactory response has been forthcoming. And a satisfactory response includes both complete transparency and accountability for those involved and we will not be seeking further services until that happens.“
However, he said PwC would be allowed to complete a project, worth between $300,000 and $400,00, for the bank helping to calculate how much it has underpaid former staff.
In a separate senate estimates hearing, Australian Prudential Regulation Authority chairman John Lonsdale said officials had been engaging with the big banks to make sure PwC had not approached them with any confidential information it might have received through its work with the regulator.
His latest meeting about this was just last week, he said, and “it [was] something that we are examining”.
PwC said it would co-operate with the new review by the Tax Practitioners Board.
“We can confirm we received the request yesterday evening with a deadline of 20 June,” a PwC spokesman said. “We will respond in accordance with the TPB’s request.”
PwC announced on Monday the nine partnerswould be put on leave as part of a suite of actions in response to the scandal.
Rift between tax regulators
The hearing was also told of a rift that developed between the TPB and the Tax Office in mid-2021, several months after the initial investigation into Mr Collins was broadened into a wider examination of PwC.
Mr O’Neill said that after initially co-operating with the TPB investigation in June 2021 the tax office refused to provide further documentation and information requested by the TPB.
Under questioning from Labor senator Deborah O’Neill, who helped reveal the extent of the leaks, Mr O’Neill said that the ATO had initially co-operated with the TPB investigation.
But from June 2021, the tax office refused to provide further documentation and information as requested by the TPB.
“The ATO just said to us that they didn’t have any information that they could give to us because it would identify taxpayers, and it was protected, and they said it was not relevant to the TPB’s investigation,” Mr O’Neill said.
During the hearing, the new head of the Tax Practitioners Board, former KPMG partner Peter de Cure, denied a report in The Australian Financial Review stating he had resisted release information relating to the PwC tax leaks to the Senate.
He said that after a discussion of the agency’s board, the decision to release the emails was unanimous.
Mr de Cure, also said the body had no plans to suspend PwC despite the tax leaks scandal.
“When we completed our investigation, we went through the process of considering the relevant things to impose a sanction,” de Cure, a former KPMG partner, said.
Greens senator Barbara Pocock, referring to the requirements of the Tax Agents Services Act, asked: “Has PwC acted honestly and with integrity?”
Mr de Cure: “In relation to what happened in 2015, arguably no.”
Ms Pocock: “Arguably?”
Mr De Cure: “In relation to what they’re doing today, I would imagine they probably are.”
With Tom McIlroy, Michael Read, Hannah Wootton
ABC PwC asked to hand over more information amid new investigation into leaking of tax information
ABC Treasurer Jim Chalmers says naming of PwC partners placed on leave will happen 'in time'
‘Gobsmacking’: What we learnt about the PwC tax leaks from the ATO
Tax commissioner Chris Jordan and second commissioner Jeremy Hirschhorn were questioned by the Senate economics committee late into Tuesday night. Here are some key exchanges and what we learnt about the timeline of the PwC tax leaks.
Chris Jordan (left) and Jeremy Hirschhorn in the Senate estimates hearing on Tuesday. Alex Ellinghausen
May 2015 - the Google tax
The Multinational Anti-Avoidance Law, which was colloquially known as the “Google tax”, was announced in the federal budget. The law came into effect on January 1, 2016.
April 2016 - ATO becomes alarmed
By April 2016, the Australian Tax Office was “alarmed” after coming across schemes designed to subvert the anti-avoidance law. It started issuing three “taxpayer alerts” related to these laws and eight other alerts about other schemes, warning companies and their advisers against using such schemes.
Hirschhorn: “PwC have themselves acknowledged publicly that those alerts were in relation to schemes that they had marketed.”
During 2016 - Audits of multinationals
A total of 44 companies restructured as a result of the anti-avoidance law and a third of those companies, around 15, were PwC clients. The revenue at risk was $180 million a year. Several PwC clients set up new structures designed to sidestep the law, but eventually backed down after opposition from the ATO.
Hirschhorn: ”We’re obviously acutely focused, as is our remit, on the taxpayers. So we were in intense discussions with a range of taxpayers who were proposing to enter into these schemes and a couple who had already entered into the schemes.
”We felt that we had, in terms of tax side, the revenue at risk, that we had fully addressed the problem by the end of 2016. We had stopped the risk to the revenue system.”
During 2017 - ATO turns to marketing of schemes by big four
The ATO issued notices to acquire information from all the big four accounting firms – Deloitte, EY, KPMG and PwC – about their involvement in marketing of 11 types of avoidance schemes that were covered by the taxpayer alerts.
Labor senator Deborah O’Neill: ”You had concerns about all of the big four, providing anti avoidance advice and schemes to a range of participants in the Australian economy who were seeking to avoid paying their fair share of tax.”
Hirschhorn: ”Yes, each of the firms was associated with at least one of the alerts, and so we sent notices to the firms to check their clients and targets, and indeed to see if our intelligence was correct, as to whether they had been promoting particular schemes.”
The firms all complied with these ATO notices.
By end of 2017 - ATO learns of confidentiality breach by Peter Collins
By the end of 2017, the ATO was “very concerned” that information was being held back by firms using “highly ambitious, if not false, privilege claims”.
It issued a further wave of notices to obtain information about the schemes in another way, which was to ask PwC for internal emails.
Greens senator Barbara Pocock: “Were you able to break the cloak of invisibility? That PwC called legal professional privilege?”
Hirschhorn: ”What we were able to do was to find sufficient information for our purposes.”
As part of those documents, the ATO “found hints that there had been a breach of confidentiality” by former PwC tax partner Peter Collins.
Hirschhorn: “This was a unique situation for us. It’s the first time we’ve come across it. And ... we were horrified when we came across it.”
In October 2017, the ATO sought from Treasury a copy of the confidentiality agreements it used for external advisers. In 2018, the ATO asked specifically for the agreements signed by Peter Collins.
Hirschhorn: “We expressed general concerns to Treasury but due to secrecy, we could not share specific information or share specific concerns.”
Pocock: “It’s just embarrassing. It’s implausible. It is absurd for you to know that a breach of confidentiality was under way, and you know the individual involved, and you cannot make any comment to anyone in Treasury. That is unbelievable, it’s gobsmacking.”
Jordan: “That’s what the existing law requires. It’s interesting because some people would say we should not have any more powers to share information more widely with other government bodies. I don’t agree with that. I think we should, in appropriate circumstances.”
February 2018
Peter Collins signed a third and final confidentiality agreement with Treasury for more consultations.
March 2018
The ATO sought advice around whom it could share the Collins information with.
Jordan “We got advice from our general counsel and from [the Australian Government Solicitor] that we could not provide that information to the treasurer or assistant treasurer, and in fact we could not provide it to Treasury.”
The ATO then shared information with the Australian Federal Police.
Jordan: “As the confidentiality breach was not a tax offence, we were unable to investigate the matter further and from 2018 we sought to refer this matter to the correct authority.”
Hirschhorn: “Our path was to first explore, with the federal police, with the information that we had, noting as the commissioner said, because this is not a tax offence, we could not use our powers to investigate further, we just had to sit on the information we had and provide that to the police.”
Start of 2019 - ATO has 20 staff on PwC probe
An ATO assistant commissioner was taken offline and given 20 staff solely to focus on the PwC matters. The federal government, including the treasurer, was never advised.
Pocock: “You never had a discussion with a minister or a member of the government for this five-year period?”
Jordan: “It would have been a breach of our legislation that requires protected information to be kept by ourselves and not shared with unauthorised people. We are not allowed to share protected information with ministers.”
The ATO never prepared a ministerial submission for reform of these rules.
March 2019 - AFP declines to take case
The AFP and ATO agree an investigation into Collins would not be pursued. This was after a “year’s consideration”.
Mr Jordan said he was told that because the emails were “circumstantial information” and the ATO had no powers of investigation, there was insufficient evidence to pursue an investigation.
The ATO then considered applying the “promoter penalty” laws, and “then when that was unsuccessful, we referred it to the TPB [Tax Practitioners Board].”
July 2020 - ATO refers PwC to TPB
Having failed to secure a police investigation or apply promoter penalty laws, the ATO formally referred the case to the Tax Practitioners Board.
Jordan: “We are not allowed to refer to their professional associations. There was nowhere else to go, it was literally the AFP, the CDPP [Commonwealth Director of Public Prosecutions] ... and the TPB.”
Read the key stories about the PwC tax leaks
While the hunters are in full tally-ho mode pursuing the PwC fox finally flushed out of the Canberra thicket, there is a whole colony of rabbits quivering in the long grass, awaiting dogs picking up their scent.
To mix my metaphors, there is a footlocker of shoes yet to drop from the PwC scandal – and not on PwC.
There are hobnails due for Treasury, the AFP, the Tax Practitioners Board, the ATO and their political masters. Maybe or maybe not actual elected individuals, but certainly the hive of political advisers and handlers that comprise the modern politician.
Michael Pascoe: Waiting for other PwC shoes to drop all over Canberra
One of the chief bodies investigating the PwC tax advice scandal says reams of documents relating to the matter are yet to be released as it works to determine which staff were involved in the breach.
Tax Practitioners Board chief executive Michael O'Neill told a Senate estimates hearing there might be thousands of documents relating to the confidentiality breach case that went beyond publicly released emails.
The documents spanned communications from the tax board, Australian Taxation Office and PwC, he said.
Reams of PwC tax leak documents probed for key names