Pictet ~ US president’s son Hunter Biden indicted on tax charges Grand jury …
Big four partners face ‘career-ending’ fines in PwC fallout
Ronald MizenSenior reporter
The big four accounting firms will be hit with penalties of up to $782.5 million for breaching the tax agent code of professional conduct under an overhaul proposed by the government in response to the PwC tax scandal.
The code of conduct will also be updated with stricter rules on conflicts of interests, profiting from government information, and false or misleading statements to the Tax Practitioners Board.
The move is part of a broader multi-year suite of reforms being pursued by the government following the PwC tax scandal that are designed to ward off similar conduct and severely punish it if it does occur.
The changes are detailed in a discussion paper released on Sunday by Assistant Treasurer Stephen Jones, who said while the vast majority of tax agents were doing the right thing, the PwC tax leaks scandal showed the existing laws were “insufficient” to respond when misconduct occurred.
“If these were in place back then, I’m confident that PwC would not have happened,” he said. “Everyone is now on notice. [These] penalties will punch a hole in the earnings of the partnership and end the careers of the culprits.”
The paper proposes giving the Tax Practitioner’s Board a series of escalating civil sanctions for breaches of the code of conduct, including infringement notices, enforceable voluntary undertakings, and increased civil penalties.
Under the strengthened civil penalty regime, individuals face a maximum of $782,500 for the most serious breaches of the code of conduct, a 1000 per cent increase on the current penalty.
$782.5m sanction
Corporations and significant global entities – which would capture KPMG, Deloitte, EY and PwC – face a maximum penalty of the greatest of either $15.6 million or 10 per ent of aggregate turnover to a cap of $782.5 million; each of the firm’s partners would face the maximum penalty for individuals.
Under the current regime, the maximum penalty for companies is just $391,250, while for significant global entities it depends on their structure.
New criminal penalties would also be introduced for people operating as unregistered tax agents.
The Tax Practitioners Board would need to apply to the Federal Court to have civil or criminal penalties imposed. It will, however, be able to issue infringements notices worth up to $3756 for individuals and $18,780 for corporations or significant global entities without court approval.
The board will retain its existing powers to issue written cautions, issue orders such as education directives, suspend or cancel a tax practitioner’s registration, and seek court-ordered injunctions.
The discussion paper is the first of eight flowing from the PwC tax scandal, first revealed by The Australian Financial Review, which involved PwC partners using confidential public tax information to benefit clients.
The scandal resulted in PwC’s government work drying up, and led the firm’s leadership to make the drastic decision to sell the firm’s public sector consulting division to private equity investor Allegro Group for $1.
In the coming months, Mr Jones will also launch similar papers on the tax practitioner registration requirements; the penalty regime that applies to promoters of tax schemes; the Australian Taxation Office’s and TPB’s respective investigation and information gathering powers; and emerging fraud and systemic abuse of the tax and superannuation systems.
In August, the government passed laws requiring tax agents to not work with people or entities who were disqualified by the TPB. It also reduced the tax agent registration period from three years to one year, and enabled the code of conduct to be changed by regulation, which it is now seeking to do.
In November, Mr Jones introduced further bills to increase the scope and penalty for tax exploitation scheme promotors; improve information sharing on potential misconduct; and extend whistleblower protections.
Find out the inside scoop about Accenture, Deloitte, EY, KPMG, PwC and McKinsey. Sign up to our weekly Professional Life newsletter.
Ronald Mizen reports on the intersection of politics, business, economics and the law from Parliament House, Canberra. Connect with Ronald on Twitter. Email Ronald at ronald.mizen@afr.com
