City accountancy firms KMPG, PwC, EY and Forvis Mazars react to audit watchdog overhaul
KPMG Australia Gives Up on the Idea of Competing With Big Law (or Medium Law, or Small Law)
PwC’s partners in for a rude tax shock; Uni action brings together a ‘legal odd couple’
When it comes to the news cycle PwC is the gift that keeps on giving but sometimes it makes it too easy, such as the latest revelation it understated its partners’ income to the tax office.
YONI BASHAN
That would be something to behold, right? An embarrassment to top off the pile-on of recent humiliations to its battered brand.
Now imagine that in doing so the firm understated its partners’ income to the tax office, leaving those partners personally liable for a liquidity event that no one anticipated – and they’ve been given two weeks to come up with the money.
This revelation has sent hundreds of PwC’s highest-paid associates and directors into absolute meltdown, forcing them to face fresh tax bills ranging from $30,000 to $300,000 (for those in the highest pay brackets). They were blindsided with this news last Friday in what was obviously a very tense and unpleasant call.
You can just imagine the distress this might cause for someone suddenly told to find $100,000 down the back of a couch over the next seven days. It also explains why PwC put out an email on Tuesday offering counselling to those who need it.
Many partners suspect the firm has known about this for months. And why not? PwC closes its accounts at the start of the calendar year.
Oh, but PwC doesn’t see this as a blunder at all, vehemently claiming this is all part of ordinary business. “The estimated percentage of tax paid by partners will vary from year to year as a result of tax timing and permanent adjustments experienced by the business,” a spokeswoman said. “The average rate of tax paid by partners over the past five years is approximately 38 per cent. For this current year we expect that average rate to be higher, including due to the impacts of exiting the government business.”
Much higher, in fact. Estimates for some people will reach in the neighbourhood of 65 per cent. For that price, they might as well go live in Aruba. The tax rate is a comparatively reasonable 52 per cent and one can live like a Caribbean A-lister.
Partners who have already had it up to their hairline with the irritations of working at PwC will probably leave because of this. There are 900 all up and they’d already been given a kick in the keister last year when CEO Kevin Burrowes announced a 30 per cent salary reduction for FY24.
Partly done as a bit of self-flagellation, that haircut was supposed to offset the losses set off by the vaporisation of its government services division, later sold for a buck to Allegro Funds and renamed Scyne Advisory. Thanks a lot, tax leaks scandal.
In fact, Scyne might also find itself in the gun sights over this little tax snafu because its people were technically partners at PwC for three months during the previous financial year. We’ll see how much stomach its leaders have to foot a bill for a mess of its sister’s making. Apparently they’ll fight it.
Burrowes isn’t likely to find himself as affected because he’s a new partner (apparently he said that on the call, too). He also receives $1.2m in top-up payments from PwC International each year, or roughly the amount he stood to lose from that haircut ordered on everyone else. So, yes, much anger being vented in his direction; everyone else’s salary has taken a dive to the power of two, and they’re only learning now that what was taken home wasn’t all of theirs to spend.
Older partners might remember that this has happened before at PwC, but it’s been a while. The catalyst this time seems to have been timing differences created out of PwC’s fire sale of its 49 per cent stake in an indigenous consulting firm – since purchased by Deloitte – and the sell-off of its government services arm to Allegro, among other deals.
Is it true what we hear, too, that there’ll be a partners summit at the Park Royal in Sydney on Monday? Burrowes is down to attend, but does that seem wise?
A Trump rally would be safer at this point.
Strange bedfellows
The University of Sydney is facing class action litigation from Levitt Robinson and its barrister Adam Butt over the “sustained and toxic nature” of attacks on Jewish students and staff.
The substance of these claims is that the university breached the Racial Discrimination Act and breached its duty of care, although other breaches are also cited.
Everyone is eager to see how this case pans out, and whether more universities will be challenged in court.
For now, Levitt Robinson has partnered with The Georgatos Foundation, an obscure outfit that’s accepting donations to fund the action.
It’s a registered charity whose directors include Levitt Robinson senior partner Stewart Levitt and members of the Georgatos family, among them Gerasimas“Gerry” Georgatos, who’s run for parliament with the Greens and the WikiLeaks Party. Neither tilt was successful.
Georgatos has been known for making controversial and incongruous commentary about Israel in the past. In 2010 he criticised an Israel Defence Forces raid on a flotilla of ships that tried to breach what a UN investigation later found was a legal and appropriate blockade of Gaza.
In remarks that tend to align Georgatos with the tent protesters on university campuses, he wrote: “The aid flotilla is analogous of the (sic) last 7 decades of dispossession and how this dispossession is sustained.
“Sling shots, pieces of wood and physical resistance verse (sic) Israeli commandos and guns. Israeli firepower verse mere Palestinian desperation.
“Maybe the unfolding human rights language will spark something in light of the Gaza invasion, the continued occupation of Palestinian remnant territory.”
And since 2010 the rhetoric doesn’t appear to have simmered down much, either. Three years ago Georgatos posted thoughts to Facebook on Australia Day, or “Invasion Day” as he calls it.
“It was an invasion,” he wrote. “It was all about conquering lands for the invaders … As was Palestine, 98 per cent subsumed, despite the premise of a return to a homeland near two millennia later for Holocaust survivors and others.”
So how does this guy find himself on the Jewish side of a class action against Sydney university?
Questions put to the Foundation weren’t answered, but that doesn’t come as much of a surprise.
Established in 2021, it didn’t file a governing document with the regulator until a month ago. It also recorded no financial activity during FY24, and seems to have no staff on the books.