Coalition senator Richard Colbeck has been pissed off with the Australian Taxation Office and scolded accounting firm PwC for its ‘crap’ internal processes during committee hearings that delved into the tax policy confidentiality saga.

The senate kicked off an inquiry process on March 9, prompted by the controversy over the PwC tax policy confidentiality breach — a controversy that became public as a result of the Tax Practitioners Board announcing in January that it had disciplined both a former partner of the firm, Peter Collins, and the firm itself.

Collins had his registration terminated and was prohibited from reapplying for two years, but his old firm was placed on an order that requires it to report every six months over two years on how it is managing its obligations to monitor conflicts of interest.

Colbeck, the chairman of the references committee looking at government consultants, told The Mandarin that the process of the committee’s work still has some way to go before it reports in March on what reforms ought to be made to procurement processes and to the regulation of those that are involved in the provision of services to government.

He said that some things stood out to him during the year. Some of those included the fact highly paid executives within consulting and accounting firms couldn’t perform particularly well under fire.

Colbeck and his colleagues, Labor senator Deborah O’Neill and Australian Greens’ senator Barbara Pocock, saw one major consulting firm after another front the committee.

The three inquisitors put multimillion-dollar earners through their paces and Colbeck’s assessment of their performance is far from a perfect 10.

“I was surprised how poorly prepared consultants were to provide evidence to the inquiry – at times they have been like a deer in the headlights,” Colbeck said. “Given how they market themselves, I thought they would be better prepared and more familiar with process.”

The committee has heard evidence about the PwC tax confidentiality breach, KPMG’s exam cheating scandal and its work on the NSW Transport Asset Holding Entity, and numerous pieces of evidence related to partnership agreements, remuneration and firm culture.

Some of these other issues, however, were overshadowed by the focus on PwC’s Australian and international operations that only intensified when the firm released a series of publications in September that included the much-anticipated report by Dr Ziggy Switkowski into the firm’s culture and governance.



The release of the firm’s own assessments in September also opened the door for PwC to be called before the committee because committee members, including Colbeck, had been reluctant to call the firm to avoid compromising the various investigations into the confidentiality breach that include a continuing Australian Federal Police investigation.

Colbeck told PwC that representatives, including new CEO Kevin Burrowes, found the report into the firm’s culture a depressing read because every time he turned to a new section it told him how “crap” the internal processes were.

“I genuinely wonder how you believe you can recover trust when all of the systems that you say you have, all of the procedures that you say you have at a local and a global level, were ignored. They didn’t work,” Colbeck observed.

Burrowes countered by saying there had been a range of changes since his appointment to the Australian firm’s top job as well as reiterating the firm’s intention to implement a suite of changes to improve governance arrangements.

The PwC chief said he had been instrumental in ensuring procedures and processes for client engagement acceptance were changed, and stated that he had instituted changes to improve governance practices with the firm that included a committee that looked at engagement risks to weed out engagements that the firm should not take on.

“We have established something called a client committee. It is something other firms around our network use. That client committee is tasked with looking at situations that may be problematic from a reputation perspective or may have issues to do with whether we can deliver the work,” Burrowes told the committee during what was a rare unscripted public appearance.

“That has been in place now for approximately, I would say, six to eight weeks. It has met a number of times. That committee is turning away work that we previously would have done. I think that is a sign already that we are starting to change.”

The usually polite Colbeck also told the Australian Taxation Office that he was “pissed off” with the ATO cutting a deal with PwC to halve a financial penalty during the most recent round of senate estimates.

“Can I just, while I start with you, add my pissed-offness — or just how pissed off I am — that that $1.4 million was cut in half. Those are probably cruder terms than senator Pocock would use,” Colbeck told Jeremy Hirschhorn, the ATO’s second commissioner during a spirited senate estimates exchange.

Colbeck told The Mandarin that evidence from the firms and the public service provided examples of what happens when poor culture exists regardless of the sector in which it occurs.

He pointed to the evidence provided by Elizabeth Broderick on the internal firm culture at EY following that Big Four firm’s publication of a review, and also his own reading on the quality of governance in parts of the public sector.

“This inquiry has been another demonstration of the importance of strong leadership driving culture in organisations because when the focus is wrong, the business goes off course,” he said.

One of the things that has been absent, Colbeck said, is advocacy for clear solutions to the problems the committee has through government procurement processes.

“We have heard plenty of evidence of misdemeanours but little in terms of resolution or reforms,” he said. “We will be pursuing this in the new year.”

Unpicking how accounting and consulting firms have been embedded in the government sector has been a key focus for the Greens’ Pocock.

She said that one of the main things that has become clearer is the involvement of large accounting practices in the machinery of government.

“I’m talking about the architecture of the tax system and the professional organisation structures. I think that has become clearer and clearer,” Pocock said.

“I think that capture issue is really interesting and that’s why the new appointment of a tax commissioner that comes from a different stable with 30 years of public sector experience is, I think, a good sign and a good decision.”

Pocock was instrumental in securing amendments to the Tax Agent Service Actthat were designed to restrict people with continuing financial interests with Big Four accounting firms from being appointed to the TPB.

That grab bag of Greens amendments also included mandatory ‘dob in’ requirements for registered tax agents who have been criticised by the professional accounting bodies and other groups representing registered tax agents as needing further work to provide protections for those who complain about a colleague’s behaviour.

Another issue that has interested Pocock is the volume of work that has gone to consulting practices rather than being kept in-house for public servants to tackle.

“That has been one of the really powerful lessons of the last year that has driven and kept the public engaged in this issue — the size of the eking out of the public sector,” Pocock said.

Another factor the Greens senator is keen to point at is the power of the senate and the work it has done to delve into the details of a range of issues.

The senate’s wins during the year included securing emails from the Tax Practitioners Board that revealed the internal communications between various partners at PwC on matters related to tax consultation.

Those emails were secured following requests from O’Neill who then ensured choice cuts were read into Hansard at every available opportunity to reinforce her case — and that of other committee members — that change is needed in relation to regulating the conduct of professional services firms and the individuals that worked within them.

Numerous questions on notice had gone to various accounting firms that revealed more about their internal operations than journalists and other sticky beaks could ever hope to get as outsiders.

Pocock said that she wished the load had not fallen to the senate to “excavate the facts” about the behaviour of Collins and PwC in the tax policy saga.

She observed that she and her colleagues on the committee had heard much about the conflicts of interest that exist within firms and that there will need to be work undertaken to look at how the practices are regulated.

“One of the lessons that comes from that is to ensure that we properly govern the Big Four firms. That is the project for next year, I think,” Pocock said.

“What are the reforms around the walls between different parts of Big Four businesses, and the penalties that should be there for the failure to protect the public interest.”

The committee’s work has not just involved the needling of domestic firms and public servants on the issue of the conduct of those individuals and practices that provide services to government.

A key task that Colbeck has undertaken as chairman is to write to his various committee counterparts in the United States Congress and the parliament in the United Kingdom about the global aspects of the PwC confidentiality breach.

One letter sent to Dame Meg Hillier, the chair of the Public Accounts Committee of the House of Commons, outlined the work of the Australian parliamentary committee, details of the disciplinary action taken by the Tax Practitioners Board as well as the work of the Australian Federal Police investigating the confidentiality breach.

Colbeck highlighted the international dimensions of the activities that were branded by PwC’s tax division as “Project North America”.

“The purpose of the breach was to use confidential tax office information to generate additional custom and revenue for PwC by pitching to global businesses the scheme to avoid tax based on the use of the ‘inside information’,” Colbeck told Hillier.

Colbeck’s letter further notes that PwC International “has been at pains to restrict further fallout from this matter to Australia”, but that is — in Colbeck’s view — unsustainable.

“I believe the behaviours of PwC and the attempts to avoid taxes internationally may be a matter of interest to your committee,” Colbeck’s letter says.

“The negotiations to prevent international tax avoidance were important reforms for our countries and attempts to circumvent that work deserve thorough investigation.”

Colbeck told The Mandarin that he continues to be dissatisfied with the responses of PwC Internationally — especially where a report by law firm Linklaters into the international tax partners is concerned.

“PwC believe, wrongly, that they can insulate the rest of the business internationally by withholding the Linklaters report,” Colbeck said.

“This is contemptuous of the senate process and all Australians and they will not be able to repair their reputation until they genuinely come clean. If they think otherwise — they are kidding themselves.”

Anybody thinking that they will stop hearing about the PwC tax policy confidentiality breach any time soon is also kidding themselves.

Expect extensive coverage of the tax leak saga 12 months on when the anniversary of the TPB’s big reveal of the penalties it hit PwC and Collins with comes around on January 23.

It will refocus attention on the controversy at a time when the firm will itself be bedding down various changes to processes as it promised following the release of the Switkowski review.

The Colbeck committee is due to report in March, and it is understood further hearings will take place before the committee pulls together a final view while a committee chaired by Labor’s O’Neill will continue work on looking at the ethics and governance structures of professional firms.

Federal government proposals on the reform to tax regulation will continue over the next two years and every single one thus far is tagged as a response to the conduct of former PwC partners in handling confidential information.

That characterisation may not be true for everything the government proposes to ratchet up the procedures, processes and penalties that can be levied against a tax or BAS agents that meander over to the dark side of the street.

The government’s discussion paper on increasing the sanctions the TPB can use to discipline registered agents is significantly inspired by the James review that reported back in 2019.

It was a review that was undertaken to see what reforms might be useful to the TPB processes after it had been in operation for a decade.

The recommendations for the James review have been in existence for a while now. It is unclear how recommendations gathering dust since 2019 are a response to a so-called tax leak controversy that blew up like a supernova in 2023.

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