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A new inquiry by the Tax Practitioners Board, the body that uncovered the PwC leaks scandal, is focusing on the failure by the big four firm and by individual partners to report the confidentiality breaches by the firm’s former head of international tax, Peter Collins.
Senator Deborah O’Neill during the Senate inquiry into consultants held in Parliament House in Canberra on Wednesday 7 June 2023. Alex Ellinghausen
The TPB has honed in on the legal obligation that accounting firms and individuals have to report breaches of fitness and propriety by any partners under the Tax Agents Services Act.
The focus of the TPB’s new inquiry will alarm current and former senior PwC leaders aware that the firm was monetising the confidential information obtained by Mr Collins. The Federal Police is also investigating the leaks of Treasury tax plans.
The details of the inquiry were revealed during a full-day hearing of the ongoing Senate inquiry into consulting that returned again and again to the PwC leaks matter.
The Department of Finance said PwC had yet to explain to them how the firm was going to “ring-fence” its embattled Commonwealth consulting services during the hearings; Treasury officials denied they had a “sleepy response” to being told Mr Collins may be leaking their confidential information; and KPMG chief executive Andrew Yates called the PwC leaks scandal “disturbing” as he apologised for his firm’s cheating scandaland its work on a controversial NSW transport entity.
An official from the ATO also denied that the Tax Office had attempted to curtail part of the investigation into the PwC leaks scandal by the industry regulator, calling a Tuesday report by The Australian Financial Review “misleading”.
‘Forthright discussions’
Second Commissioner Jeremy Hirschhorn told the inquiry that he and Tax Commissioner Chris Jordan had a “forthright discussion” with members of the Tax Practitioners Board in September 2021 about the TPB’s investigation into PwC, but said “there was no shouting”.
Second Commissioner Hirschhorn also denied that the meeting with the TPB board, which focused on access to settlement agreements, was made after complaints by US tech companies.
He said the ATO’s concern had centred around the way the TPB was investigating the matter and that the agency had supported the investigation of Mr Collins and the firm.
Later in the hearing, TPB chairman Peter de Cure also said there had been a “forthright discussion” with the senior ATO officials during the 2021 board meeting.
“I was surprised by their approach,” Mr de Cure said. “The ATO representatives definitely expressed in clear and unmistakable terms their views in relation to, I guess, how we were investigating the matter.
“We listened...it was very direct – there wasn’t a shouting match, in any shape or form. The ATO had a view as to how we were conducting our investigations. They expressed that view.
“They subsequently agreed with us based on their own internal legal advice that the ways our investigations were being conducted were in accordance with the law and in accordance with our powers to investigate.”
The TPB’s new investigation is seeking to identify the individuals within PwC that would have had the responsibility to report the matter to the board.
“There was clearly a failure in terms of PwC’s notifications [to the TPB of the leaks],” the CEO of the Tax Practitioners Board, Michael O’Neill, told Labor Senator Deborah O’Neill at the Senate consultants inquiry on Wednesday.
“In 2016, in view of what we know now, it must have been clear to PwC that Mr Peter John Collins was not a fit and proper person, yet they didn’t report anything to you,” Senator O’Neill said.
“The role of particular individuals is still under review. The role of certain registered entities is still under review,” Mr O’Neill said.
‘Robust engagement’
He also said that while PwC was now being co-operative with the TPB as it carried out its new investigation, its previous approach had been robust.
Mr O’Neill: “PwC were robust in their engagement with us, ... as we would expect any firm.”
Senator O’Neill: “There’s a lot of robust conversations going on. I wonder how loud the decibel level is.”
Mr de Cure: “PwC’s submissions are made by PwC in accordance with their, their ...“
Senator O’Neill: “Cultural practices. Which were resistant to the ATO and legalistic with you. That’s hardly exemplary behaviour.”
Mr De Cure: “I’m not painting it as exemplary behaviour, Senator.”
On another front, Mr O’Neill said the Tax Office had discussed a possible referral of those at PwC who were responsible for extensive claims of legal professional privilege.
Last week Commissioner Jordan told estimates its investigations into PwC’s schemes to sidestep a 2016 tax avoidance law was held up by “false claims” of legal privilege.
“We had very detailed conversations with the ATO about the PwC matter, and that included the fact that there were tens of thousands of legal privilege claims,” Mr O’Neill said.
“They did say to us that they expected that there would be some issues to those legal privilege cases, that they would ultimately refer to us.
“And recently they’ve had discussions with us about the conduct or alleged misconduct associated with those legal privilege claims. And so that’s another matter for our consideration.“
The inquiry committee decided on Wednesday against releasing the list of PwC partners put on leave over the leaks matter and another list of 63 current and former PwC partners and staff that received emails associated with issue.
In another related development, professional body Chartered Accountants ANZ announced that it intended to quintuple the maximum penalty payable for breaches of its code by member firms as a way of rebuilding the industry’s reputation.