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Greens call for consulting reforms PwC tax scandal investigation ongoing Scyne advisory cleared - News Corp drafts in PwC as it deals with Meta cash hole
The Tax Practitioners Board has confirmed it has evidence suggesting more than 22 individuals in six countries may have had some involvement in the sharing or use of confidential tax policy information in the PwC tax leak saga.
PwC Australia is still under investigation over its role in a tax scandal, as the Department of Finance mulls reforms to manage contracts and consultants working with government.
Greens Senator Barbara Pocock said the hearings showed the need
for further reforms in the public sector’s engagement with consultants.
Picture: NCA NewsWire / Martin Ollman
PwC Australia is still under review by the Department of Finance over its role in a tax scandal, as the department mulls further reforms to manage contracts and consultants working with government.
Speaking at a parliamentary hearing on Monday, the department’s commercial group procurement division first secretary Andrew Danks said the government was still reviewing PwC’s arrangements with the federal public service after the discovery of the firm’s misuse of confidential information last year.
This is despite PwC selling much of its government consulting business for $1 to private equity player Allegro Funds.
Mr Danks said PwC still had some contracts with the government and Finance would review its engagement with the public service and its handling of confidentiality issues.
He said Finance’s review of Scyne Advisory, the former government consulting arm of PwC, had found the firm was “an appropriate company to deal with”.
“There are not a lot of contracts PwC has with the Commonwealth anymore,” he said. “We still think it’s important we finish that review to provide agencies some comfort around the ethical soundness.”
This comes after PwC was revealed to have misused confidential government tax briefing documents to create new tax strategies for clients.
Mr Danks said Finance was also finalising new rules that would require firms dealing with the public service to notify the government if there was a similar breach to the PwC tax scandal.
Finance also told the inquiry it was well progressed on a review into confidentiality agreements with consultants. The department’s commercial group deputy secretary Richard Windeye said the review would consider the circumstances in which conflicts can arrive and will form a part of a package of responses from the government.
He said 52 submissions had been made as part of a feedback round with firms, with plans to make the code available from July. The code would require firms to avoid conflicts and if one is identified, to disclose it and have a strategy for managing it.
Mr Windeye said the government was also looking to create a central register to track terminations of consulting contracts to the public service, which would see firms named and shamed for material breaches.
Greens Senator Barbara Pocock said the hearings showed the need for further reforms in the public sector’s engagement with consultants.
“The last year has revealed serious weaknesses in the regulation and enforcement of external contracts with the Commonwealth government,” she said. “The regulation of consultants and the enforcement of contract terms has been shown to be seriously lacking right across government.”
Mr Hirschhorn told Mr Sayers about a range of concerns with PwC’s tax group behaviours, including warning the PwC boss to review a tranche of emails that allegedly showed collusion between partners at the firm to share confidential information.
Mr Hirschhorn said if given the opportunity again he would have sought to raise his concerns with PwC’s board. He said he hoped the PwC governance board “would have taken things seriously”, rather than the response the issue received which saw it characterised as confined to the firm’s tax practice.
The Second Commissioner told the Inquiry into Consulting he regrets not escalating the PwC matter more rapidly given the dramatic impact the TPB’s decision had.
Second Commissioner Jeremy Hirschhorn has admitted he “fundamentally underestimated” the effect that the TPB’s publication of its findings on Peter Collins would have on PwC in a recent hearing for the Inquiry into audit, assurance and consulting.
The Tax Practitioners Board issued a release in January 2023 advising that former PwC Peter Collins had been banned as a tax agent for integrity breaches. The matter was highly publicised and has since seen the culture and ethical practices PwC and other big four firms highly scrutinised in two major inquiries.
“If I had understood what what a dramatic impact the publication of a licensing decision would have, I think we would have seen it as a more important remedy against the behaviour of PwC,” Hirschhorn told the Committee.
“[At the time] we did not view it as a very effective or very strong remedy. We deprioritised the licensing decision perhaps more than we could have.”
Hirschhorn said after reflecting on the events surrounding the matter, he believes the ATO could have expedited the matter to the Tax Practitioners Board more quickly.
“If I was in the same situation again, it would be to move through the three phrase of AFP interaction, promotor penalties and TPB referral more quickly so that it would get to the TPB earlier,” he said.
“To be blunt, between the ATO and TPB there’s been other adverse findings in relation to licensing decisions and promoter penalty decisions against partners of big firms and they’ve been page 10 of the Australian Financial Review for one day so we did not anticipate that this would get such as a significant public response.”
Senator Barbara Pocock said there had been increased public awareness about the huge growth in consulting and concerns around whether there is appropriate, ethical practices in these firms.
“As we have discovered over the past year, this is not just an issue confined to PwC. There are a range of different behaviours that our inquiry has surfaced and it shows just how important it is that such matters do receive public attention,” said Pocock.
“The average voter now are very literate about PwC and can tell you about what the TPB is and have watched this with great interest.”
Hirschhorn was also questioned about whether the TPB should be completely removed from the ATO and made its own separate entity.
Given the relatively small size of the TPB, the Second Commissioner said the TPB may struggle to attract staff if it was entirely its own independent entity.
“It may be difficult to attract the right kind of staff to a small agency without a guaranteed path back to the ATO,” he said.
“So the secondment recommendation is one where there are pros and cons because you have to think about the long-term staffing go the TPB.”
News Corp has tapped PwC Australia to help with its biggest restructure of the last decade as it seeks to deal with Meta ripping tens of millions of dollars out of the Australian news market.
News Corp Australia executive chairman Michael Miller. Alex Ellinghausen
Staff at News Corp, which owns The Daily Telegraph, Herald Sun, Courier Mail and The Australian,were caught unaware by the news, and management had not offered explanation on Monday. Sources, who did not have authority to speak publicly, said no final decisions had been made.
A range of different executives have been involved with the project, including News Corp’s local executive chairman Michael Miller, managing director of consumer Mark Reinke, and managing director of client product Pippa Leary. Sources stressed they were not the only executives involved.
Meta, which owns Facebook, said in March it would not be renewing three-year news deals struck with Australian outlets in 2021. Meta’s 13 deals with local publishers, including Nine – owner of the Financial Review – were worth about $70 million a year.
Meta and Google struck the deals – worth $250 million to the local industry – to avoid being designated under the government’s News Media Bargaining Code.
Google has signalled it will likely sign new deals, although it is expected they will not be for more money.
Meta has staunchly refused to negotiate with Canadian publishers over a similar law, the Online News Act. While Google came to a $C100 million-a-year ($113 million) agreement with the Canadian government, Meta has disabled news links from its platforms.
Under the proposal being explored, News Corp Australia would be restructured into three divisions with separate balance sheets. The first would be News Corp’s free content, such as news.com.au, a second with its city-based tabloids, and a third with what it considers prestige products, such as The Australian, Vogue Australia, GQ Australia and Wish Magazine.
News Corp and PwC declined to comment.
News Corp has also extensively used McKinsey & Co, including exploring growth options in 2020 and helping with the integration of Foxtel and Fox Sports in 2018 and 2019.
News Corp staff sources expressed frustration with the lack of communication and the shrinking resources they are faced with in putting out newspapers every day, especially the large Friday and weekend editions. They pointed to News Corp’s failed $70 million investment in wagering start-up Betr as money wasted, which could have been used on editorial.
Under the News Media Bargaining Code, the government can ‘designate’ Meta and make it pay, although it is yet to do so. The process of designation would take months as it would force all sides to negotiate with a government-appointed mediator before arbitration.
Max Mason covers insolvency, courts, regulation, financial crime, cybercrime and corporate wrongdoing. A Walkley Award winner, Max's journalism has also received awards from the National Press Club of Australia, the Kennedy Awards and Citibank. Connect with Max on Twitter. Email Max at max.mason@afr.com
Sam Buckingham-Jones is the media and marketing reporter at The Australian Financial Review. Connect with Sam on Twitter.
