Client alleges ex-EY partner took secret payments on tax scheme
PwC global boss rejects Senate request for tax leak report Edmund Tadros
PwC global chairman Bob Moritz has rejected a Senate committee’s request to provide a legal report on the overseas partners who were involved in the consulting giant’s tax leaks scandal, arguing the document is legally privileged and confidential to PwC International.
In correspondence to senators, Mr Moritz said the firm had to respectfully decline the request. It is the first time Mr Moritz has been publicly drawn into the scandal, which has rocked the firm in Australia and is threatening to spread overseas.
Bob Moritz has intervened in the firm’s Australian tax leaks scandal. Christopher Pearce
PwC International, which now has “oversight” of PwC Australia, on Thursday afternoon also revealed that the report, by law firm Linklaters, involved “forensic searches for documents as well as interviews” across a number of countries.
PwC Australia released a statement on Thursday which detailed how it has been co-operating with senators and regulators examining the tax leaks matter, including by publicly releasing reports into the local aspects of the scandal.
PwC International had previously released a brief summary of the Linklaters report which stated that six of the firm’s international personnel were disciplined for not inquiring about the nature of what turned out to be leaked information.
The new material published on Thursday reiterates this finding and repeats that none of the confidential information was used for the “commercial benefit” of PwC. It also says Linklaters concluded that the confidential information “related primarily to OECD” tax policy and not the tax structures of multinational companies.
PwC Australia chief executive Kevin Burrowes has previously told senators that the Linklaters report is legally privileged and confidential to PwC International. The Australian firm also believes that local authorities already have the evidence they need to investigate the overseas partners.
Senators want the report
Senators examining the matter have repeatedly demanded access to the Linklaters report, warning that PwC Australia’s reform program risks being derailed by PwC International’s defiance over the request.
The Australian Financial Review revealed on Sunday that PwC International has put the local operation into “supervised remediation” over the tax leaks matter. This means Mr Moritz, as part of PwC International’s network leadership team, “may impose whatever remedial action it deems fit upon a defaulting firm”, according to its regulations.
The politicians now intend to call PwC International executives before parliament to personally explain why the company is withholding the Linklaters report. The Senate can compel individuals within Australia to attend hearings but not those based outside the country.
The tax leaks matter involved a former partner sharing confidential tax information with PwC personnel who then used it to help clients sidestep tax laws he was helping Treasury develop. It has triggered three parliamentary inquiries, a federal police investigation, nine ongoing Tax Practitioner Board investigations, the biggest crackdown on misconduct by tax advisers in Australian history and eight Treasury reviews into all aspects of the sector.
The three-page PwC International document published on Thursday afternoon outlines how the London-based organisation hired Linklaters to “form an independent assessment of what happened”.
Secret information not used for ‘commercial gain’
The investigation “focused on PwC member firms whose personnel were identified as having received confidential or potentially confidential information from personnel at PwC Australia” and involved “investigation by Linklaters and counsel in multiple jurisdictions included forensic searches for documents as well as interviews”.
The law firm concluded that while “a number of” overseas PwC personnel received confidential information, most did not know it was secret. This was because much of the material related to OECD tax developments which were the subject of “worldwide consultations, many of which were public in nature”.
The statement added: “Although the International Review determined that six individuals should have raised questions as to whether certain information they received was confidential, none of them further shared the information outside PwC or used the information to obtain a commercial benefit.”
The PwC Australia three-page document details the steps that the local firm has made to co-operate with politicians and other authorities examining the tax leaks matter.
This co-operation included publishing Ziggy Switkowski’s report into PwC Australia’s governance, providing a detailed summary of the Australian legal reports into the scandal, appearing before public inquiries and answering hundreds of questions on notice.
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Edmund Tadros leads our coverage of the professional services sector. He is based in our Sydney newsroom. Connect with Edmund on Twitter. Email Edmund at edmundtadros@afr.com.au