Nic Fildes in Sydney, Stephen Foley in New York and Michael O’Dwyer in London
PwC launches review over Australian tax law leaks
PwC has launched an independent review of the practices and culture of its Australian unit after the publication of internal emails related to a scandal involving the sharing of confidential government information on planned tax laws.
The emails, published by a senate committee, showed how PwC had used confidential information provided by Peter-John Collins, its former head of international tax in Australia, to win new business by advising clients on Australian rules aimed at clamping down on tax avoidance.
Collins was a member of an advisory group involved in confidential discussions with Australia’s Treasury department last decade about introducing laws targeting multinational tax avoidance and a diverted profits tax. He had signed strict non-disclosure agreements.
He was banned by the tax watchdog in January, at which point PwC indicated that a small number of partners had received the confidential information.
The release of the partially redacted emails in recent days, however, showed the information provided by Collins stretched beyond Australia and included employees in the UK, Ireland and the US.
Tom Seymour, the head of PwC Australia and former leader of the tax practice where Collins worked, admitted at an internal meeting on Friday that he was one of a number of partners who received emails about the “marketing approach and financial success of the tax advice”. He said this showed evidence of the “cultural problem at the time”.
PwC Global said the consultant would take “appropriate action” after a review of the Australian unit and its partners. “We deeply regret the situation that arose in Australia. It is unacceptable and goes against our culture and values,” it said.
PwC’s Australia business is one of the largest in its global network, reporting revenues of A$3bn ($2bn) in its most recent financial year. The Australian government is its largest customer and the scandal has triggered a backlash in the country.
Jim Chalmers, Australia’s Treasurer, has beefed up the powers of an accountancy industry watchdog in response to PwC’s behaviour which he described as “completely unacceptable”. Barbara Pocock, a Greens senator, has called for PwC to be banned from further government work and for it to reveal the 14 clients it advised based on Collins’ advice.
The 144 pages of internal correspondence showed how PwC used confidential information from Collins to woo clients, including US technology companies. With its inside track, it was able to advise multinationals on how to deal with Australia’s new tax arrangements almost as soon as the laws were published in 2015 and 2016.
A January 2016 email celebrated $2.5mn in new business in North America, which one partner wrote had been “heavily helped by the accuracy of the intelligence that Peter Collins was able to supply”. The Australian tax partners had worked “extensively” with other PwC firms around the world, including in the US, Netherlands and Singapore, the email said.
Collins regularly stressed in the communications that the information was “strictly confidential” and should be treated as “rumour”.
PwC’s global bosses launched a $12bn investment and branding push in 2021 that placed “earning trust” from a wide range of stakeholders at its core. The plan included creating a Trust Leadership Institute where PwC would educate clients on how to “build trust”.
The Australian controversy is the latest high-profile issue faced by PwC over its tax practice. A former PwC employee convicted for disclosing documents in the LuxLeaks scandal, which revealed the firm’s role in helping multinationals win approval for tax avoidance structures, was recognised as a whistleblower by the European Court of Human Rights in February.
Rear Window & Deborah O’Neill: Every PwC partner involved in tax leaks should go: Labor senator
The ‘dirty 34’ and PwC’s global tax dodge
The inner workings of one of the most secretive and powerful consulting firms in the world, PwC, has been laid bare in a document made public last week, revealing the firm’s brazen attempt to use confidential government tax plans to cultivate fresh business from notorious corporate tax avoiders, including a group dubbed the “dirty 34”.
PwC’s woes lurched to a new low when a Senate inquiry released the 148-page document which detailed the evidence that the Tax Practitioners Board (TPB) used to ban former PwC tax partner Peter Collins for breaching a confidentiality order with Treasury.
The document, which comprises internal company emails, showed Collins repeatedly leaked confidential information with senior PwC staff about government plans to combat tax avoidance over three years, for PwC’s benefit. The information spearheaded a push for new business, including the Silicon Valley-based US tech giants and a group dubbed the “dirty 34”.
“Agree there is an opportunity to own this space because my sense is that we are ahead of the curve,” Collins wrote in an email to colleagues in September 2015. “Have you convinced yourself there is a problem outside of the dirty 34?”
The “dirty” term originated more than a decade ago with the “dirty 30” listed by the US Public Interest Research Group as the largest tax avoiders in the US, including global names such as Boeing and GE.
The Australian Taxation Office (ATO) also had its own “dirty 30”, which Collins and PwC were also targeting. Collins mentioned this in an email dealing with speculation that legislative changes might be delayed for this group of troublesome taxpayers.
“Treasury was crystal clear on this and the politics of delaying the rule for the dirty 30 seems impossible. There is no sympathy for this group in Treasury or govt or the ATO,” Collins wrote in the email.
He saw an opportunity to use the confidential information as a way to market PwC as a solution to its ATO problem.
“Controversy treasure trove of [sic] we can land a few of these.”
The “dirty 30” were topical at the time. Then-treasurer Joe Hockey had attended a PwC tax forum in Melbourne months earlier, in July 2015, and talked about some notorious tax structures being utilised in havens such as Ireland and the Netherlands.
“I make no apologies for going after 30 multinationals that are particularly engaging in the double Irish Dutch sandwich,” Hockey said before deftly adding, “which I would hope you’re not familiar with at PwC.”
PwC’s managing partner of tax and legal at the time, Tom Seymour, jumped in: “We thought it was something you got for lunch.”
Seymour, now the head of PwC’s Australian operations is taking a less flippant approach now. On Friday, he admitted he was one of the partners who received this information and announced that there will be an independent review of PwC’s governance, culture and accountability.
“There were a number of partners who were in senior roles or 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. I am one of these partners. While these emails did not contain breaches of confidentiality, they do demonstrate evidence of the cultural problem at the time,” he said.
He also reviewed his earlier statements that played down the seriousness of the leak.
“I have reflected on the previous communications I have provided to you on the TPB matter and on reflection these have been technical and legalistic in nature. I have not addressed the broader cultural issues. This cultural issue is reflected in the emails that were provided to the TPB,” he told the PwC partners.
“It is important that I and other senior leaders at the time that these issues occurred take accountability for what has transpired.”
Seymour was still head of PwC’s tax practice in Australia at that time. He has not been implicated in any wrongdoing, but the TPB document was littered with references making it clear that many within PwC were well aware confidential information was being used to market tax structures to avoid Hockey’s tax push.
“As per my other email this draft was provided to me on a strictly confidential basis,” said an email from a PwC employee out of Sydney.
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The following year, just ahead of anti-avoidance measures under the Multinational Anti-Avoidance Law being introduced, a PwC partner was crowing about the company’s success at attracting what were described as “brand-defining” clients.
The email said: “We were aggressive in telling these relationships they needed to act early (heavily helped by the accuracy of the intelligence that Peter Collins was able to supply us ... We were first to them with innovative approaches to the problem [redacted] was critical in stimulating their thinking and presenting ideas no one else had, especially in relation to the first draft of the law).”
PwC has desperately sought to play down the matter, with hundreds of millions of dollars worth of federal government business now at risk as the major political parties contemplate steps that could include the company being banned from bidding for government business.
When news broke in January that Collins, a PwC tax partner, had been banned by the TPB for leaking of secret information about Australian government plans to combat corporate tax avoidance to his colleagues, the firm was quick to play down the seriousness of the issue.
In a statement, PwC acknowledged a single confidentiality breach by Collins relating to a consultation process in 2014.
PwC staff said the information was shared with a “small group” of colleagues, and the investigation did not find that any client arrangements or structures were impacted.
The document released last week shows PwC partners set a breakneck pace in leveraging this information for its own gain before the laws were implemented. The emails show PwC utilised staff in offices as far afield as London, Dublin, Singapore, New York and the Netherlands.
One email from 2015 cites a range of industries that “might have problems”, including tech companies, online retailers, insurers, telcos, fund managers and commodity traders.
“So the field is large, and time is short.”
An earlier email from a PwC executive mentions an unnamed US tech company: “one of the hottest tech stocks around” at the time.
“As you know, Australia is at the forefront of attacking BEPS [base erosion and profit shifting] and seems to have a particular affection for US companies! Do you know if we have any relationship with them in the US? They can expect a [redacted] style ATO review down here and we would like to reach out to them.”
While PwC’s sponsorship of a $5000-a-head post budget dinner is going ahead on Tuesday, Treasurer Jim Chalmers has flagged further action that could imperil the hundreds of millions of dollars in fees PwC receives from government contracts.
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“I’ve indicated to the Treasury and to the regulators if there are more steps that are necessary, I’m prepared to take them,” Chalmers said at a press conference on Thursday.
Labor senator Deborah O’Neill, who chairs the Corporations and Financial Services Committee, emphasised the impact on all Australians.
“The fact that the ATO very quickly twigged, and interrupted the practice is a credit to the ATO, but this was constructed with a victim in mind,” she said.
“The victim was the Australian people, and everyone who relies on hospital services at the NDIS, a pension … we are the victims of what PwC, Mr Collins in particular, was attempting to construct here.”
It is a point not lost on PwC. In an email chain as part of the 148-page document, was an opinion article written by PwC to be offered to Australia’s major newspapers, including this masthead.
“Whilst no one likes paying tax, the reality is, our taxes fund the high standard of living we enjoy here in Australia. Taxes fund our roads, schools, health and welfare systems,” the opinion piece says.
“The panacea is getting the balance right between creating a tax system that is sustainable and sets Australia up for future growth and prosperity. Whilst taking care of the most vulnerable members of our society.”
The piece was also designed to serve PwC’s interests, the email made clear.
“We need to emphasise that coy [company] tax change is not a panacea to [sic] facing all issues,” it said.
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