Scoop: PwC has opened an ethics investigation into former CEO and Carlton club president Luke Sayers over allegations of conflict of interest with senior Liberal party figures.
The ATO tried five times to muzzle or dismiss Tax Practitioners Board CEO Michael O’Neill during the PwC tax leaks saga. How does that work? Arguably it suggests an obsession.
An absolute jawdropping story from @NeilChenoweth about how the Australian Tax Office repeatedly tried to stymie Michael O'Neil and his little Tax Practitioners Board which blew open the PwC scandal.
Inside the Tax Office’s bitter feud over PwC
The Tax Office made multiple attempts to sideline or to engineer the dismissal of Michael O’Neill because of his team’s actions in investigating PwC.
Neil ChenowethSenior writer
A senior Tax Office official pressed to open an investigation of the Tax Practitioners Board at the height of the PwC tax leak scandallast year, citing suspected leaks to The Australian Financial Review.
The request last June for the ATO’s fraud prevention arm to investigate board officers, which was described to the Financial Review by several Tax Office sources, was said to have been declined by the fraud team.
While that request was not actioned, documents obtained under freedom of information from Senate inquiries and other sources show the Tax Office made multiple attempts to sideline or to engineer the dismissal of board chief executive Michael O’Neill because of his team’s actions in investigating PwC, which the ATO saw as overreach.
A Tax Office spokesman did not respond to a question about the request to investigate the leak, but said the agency “has not suggested impropriety by you or the Financial Review”.
However, “it is clear from these statements ... that you have a number of sources providing you with information to inform your coverage. Statements made by the ATO relate to these sources only …”
The accusations of leaking highlight the ongoing tension between senior tax officers and the board over its investigation into PwC and former partner Peter Collins.
Senior tax officers are said to be deeply unhappy over the public revelations last year about the PwC tax leaks and ongoing Senate inquiries, which raised questions about the Tax Office’s relations with big four firms and why it took six years to bring the PwC tax scandal to light.
The Tax Office blames O’Neill for much of this embarrassment.
Greens Senator Barbara Pocock turned the knife at the Senate consultants inquiry in September: “They got a result that the ATO did not get. I’m looking at TPB right now as ‘the little engine that could’. I’m looking at the ATO and thinking ‘the little engine that didn’t’.”
The pursuit of O’Neill, a career tax officer, reflects cultural tensions within the Tax Office, where three of the four top positions are held by former partners of the big consulting or law firms; this ratio will change next month when commissioner Chris Jordan is replaced by experienced public servant Rob Heferen.
O’Neill had a stellar career at the Tax Office. In 1988 he was reportedly one of “Boucher’s raiders” (named after tax commissioner Trevor Boucher), the 37 tax officers who raided Citibank and seized hundreds of documents regarding an alleged tax avoidance scheme.
In 2001, he was head of the scheme promoters’ taskforce targeting the advisors behind mass market schemes. He went on to head the $2 billion Project Wickenby which for a decade chased offshore accounts of high-wealth Australians including Paul Hogan and Glenn Wheatley (Hogan always denied wrongdoing regarding his tax affairs).
In one of the more colourful Wickenby episodes, in October 2006 O’Neill met secretly with officers of the Bundesnachrichtendienst, Germany’s Federal Intelligence Service, to interview a Liechtensteiner whistleblower with banking details for 60 high-profile Australians, including the Lowy family.
The files came to light in 2008 when a US Senate investigation heard claims that Frank Lowy had used a Liechtenstein foundation to hide $US68 million from tax authorities – which Lowy denied. He made a confidential settlement with the Tax Office in 2011.
O’Neill went on to work on Australia’s response to the international profit-shifting laws targeting multinationals, including sitting on consultation committees with PwC partner Peter Collins.
In 2018, O’Neill was appointed to run the board, which has a staff of some 150 tax officers on secondment.
Claims of ‘serious overreach’ by TPB
In January 2021, the board formally opened an investigation into Collins after receiving a referral from the Tax Office six months earlier. But the two regulators fell out after the board broadened its investigation to include PwC.
The Tax Office considers that the board should be restricted to regulating individual accountants and small firms, leaving the major firms to the larger agency. After the board asked in June 2021 for documents about PwC’s engagement with multinational clients, the Tax Office refused to provide further material.
By late August 2021, the commissioner asked to address the board. Jordan appeared at the board’s September 1 meeting where he launched a ferocious attack on what he described as an illegal investigation by board officers, who he said had accessed ATO records without consent. O’Neill was said to have overreached.
“No, we did not tell them to back off,” second commissioner Jeremy Hirschhorn told the Senate inquiry last June.
“We did have a forthright discussion at that meeting and it was not about whether they conducted a review on Mr Collins or PwC. In fact, we were very keen that they did a review on Mr Collins and PwC. … What we were concerned about, and we discussed at that meeting – it was a forthright meeting – was how they were going about it.”
Jordan had not disclosed what he planned to speak about and board members have described being blindsided by the attack.
TPB board splits, starts internal review
Two days later the board met confidentially without O’Neill present to discuss the commissioner’s serious concerns. Several members pressed for O’Neill to be sacked or to be “performance managed” out of the job. In practice, this would have meant O’Neill returned to the Tax Office.
The split in the eight-member board was deepened by the involvement of two former PwC partners, Judy Sullivan and Peter Hogan. They had recently been appointed to the board by Assistant Treasurer Michael Sukkar and his chief of staff Barmak Amini, both PwC alumni.
Sullivan and Hogan had not been privy to the Collins/PwC investigation as part of standard TPB/ATO conflict management procedure. But Jordan’s failure to notify the board about what he intended to discuss meant that Sullivan and Hogan were both allowed to be at the September 1 meeting.
As a consequence, they were an active part of the discussion two days later discussing whether to discipline O’Neill and whether the PwC investigation should be reined in.
Jordan followed up his September 1 board appearance three weeks later with a scathing letter to board chairman Ian Klug, accusing the board’s team of misleading the ATO, accessing confidential settlement agreements with PwC’s multinational clients, and sending production orders to the US multinationals.
The board’s staff’s actions were “inexplicable”, “extraordinary”, “highly inappropriate”, “serious overreach” and “a deliberate disregard for the Tax Office concerns and an attempt to conceal these notices from us”, Jordan wrote. He would “strongly suggest” winding back the PwC investigation by “withdrawing the notices” sent to the multinationals.
“We strongly reject any suggestion that the ATO made attempts to affect the outcome of the Collins investigation,” a Tax Office spokesman said.
“The ATO referred the matter to the TPB for investigation and provided substantial information to support that investigation.”
In response to Jordan’s complaints, the board ordered an internal review of its investigators by two board members, Debra Anderson and Greg Lewis.
Bullying complaint
The Tax Office meanwhile lodged a separate complaint, a claim that O’Neill had been bullying ATO staff with unreasonable demands for documents for board investigations. This was a serious charge which triggered a separate review. However, no substantiation was offered, and no tax officer was identified as the victim of bullying.
The bullying claim fell away. The Anderson-Lewis review cleared board staff of any illegality.
Klug wrote to Jordan in January 2022 that the review found that “whilst our TPB officers acted legally and consistent with TPB policies and processes in the conduct of this investigation, it did identify opportunities to improve our processes to enhance the relationship and collaboration with the ATO”.
The Tax Office was not satisfied. It now demanded a third review, this one also targeting the board’s investigation of PwC, by an independent mediator.
Richard Oliver, a former public servant, spent several months conducting a workplace assessment, a process sponsored by Hirschhorn and Klug. This too came to nothing.
The ‘no return’ policy
O’Neill’s position, however, was about to become more precarious.
On March 25, 2022, Assistant Treasurer Sukkar announced changes in a press release titled, “Greater Independence for the Tax Practitioners Board”.
In 2019 Sukkar had received a review of the board by independent expert Keith James, which contained 28 recommendations to boost its function and independence.
He had moved on none of them. Now, however, almost three years later, Sukkar adopted just one recommendation. From July 1 the TPB chairman would have the power to hire and fire the chief executive, O’Neill.
As the press release made clear, Jordan’s consent was necessary before this delegation of power could be made. What went unreported was that as a condition of that consent, he insisted on a “no returns” policy.
It meant that if O’Neill was sacked, he would not be able to return to the Tax Office.
While Keith James had recommended the change as a way to increase the board’s independence, the political reality suggested the reverse.
This appears to be the fourth attempt to sideline O’Neill during the PwC inquiry. The proposal was dropped after the change of government in May 2022.
The Tax Office’s opposition to aspects of the PwC investigation ramped up further last year when it strenuously fought the board’s decision to release PwC emails, citing secrecy laws, risks to ongoing investigations and the dangerous precedent for breaching taxpayer confidentiality.
TPB chairman exits, leaks request
Days after the emails were released last May, Treasury reconfigured the position of TPB chairman, forcing out the incumbent, Ian Klug, after his term expired.
Peter de Cure, who had been a leading critic of O’Neill, was appointed the new chairman, on Treasury’s recommendation.
De Cure is thought to have a good relationship with Jordan and Hirschhorn, who were partners with him at KPMG, and to share their views on a restricted role for the board.
It was in this tense environment that a senior ATO officer is said to have requested an investigation into alleged leaks by TPB staff.
It suggests the enmity against the Tax Practitioner’s Board is not going away.
Success can be unforgivable.
Find out the inside scoop about Accenture, Deloitte, EY, KPMG, PwC and McKinsey. Sign up to our weekly Professional Life newsletter.
CA ANZ triples member ethics training, mandates annual pledge