“To learn who rules over you, simply find out who you are not allowed to criticise”
~ Voltaire 1694-1778
The Irish Times - PWC accused of interfering in Australian tax leaks probe
The Australian and FT - PwC accused of interfering in Australian tax leaks probe
Documents reveal PwC International threatened to expel local firm if it co-operated with scandal investigation without permission
ATO gave PwC CEO early warning about ‘incompetent’ tax division
Former PwC chief executive Luke Sayers was explicitly warned in early 2020 that the firm’s tax division was potentially committing false and misleading conduct over incorrect legal professional privilege claims.
Mr Sayers was also warned that allowing Tom Seymour, the former head of the tax division, to become the next CEO could cause problems for the firm.
The fresh revelations in the firm’s long-running tax leaks saga emerged on Friday with the release by parliament of a contemporaneous note by PwC’s former general counsel Meredith Beattie.
From left: Former PwC general counsel Meredith Beattie and former CEOs Luke Sayers and Tom Seymour.
The note relates to a meeting between ATO second commissioner Jeremy Hirschhorn and Mr Sayers in February 2020. At that time, Mr Hirschhorn said the “culture in the tax business is terrible”, that two partners within the division were “incompetent and breaching ethical standards”, and that the firm’s personnel had tried to blame clients and its own law firm for repeatedly failing to provide documents requested by the agency.
The details of the almost two-hour meeting between the men contradicted earlier evidence provided by Mr Sayers about what he knew at the time. They also illustrate how the firm’s leadership repeatedly failed to address issues that culminated in the disastrous scandal.
Mr Hirschhorn also told Mr Sayers that the firm had been given a “get out of jail free card” over its tax advice relating to multinational clients, as the ATO was unlikely to pursue legal action. He also noted that multiple other breach notices by the firm had “a long way to play out”.
The meeting was the second with Mr Sayers in which Mr Hirschhorn highlighted major issues about the firm’s tax division. It came after the ATO had requested tens of thousands of documents from the firm and its clients relating to what was seen as overly aggressive tax advice.
‘Hard decisions’ to be made
Mr Sayers has repeatedly maintained he did everything in his power to resolve the problems in the firm’s tax division and had personally intervened to resolve the firm’s problematic response to document production requests by the ATO. He has also repeatedly downplayed suggestions that he was warned about Mr Seymour’s fitness to become PwC chief executive, saying in earlier testimony that Mr Hirschhorn’s views on Mr Seymour were “not black or white”.
The file note shows that Mr Hirschhorn told Mr Sayers “that while Tom Seymour was not personally involved in the [tax issues] there were hard decisions that had to be made”. The ATO official then warned that another unnamed candidate for the CEO role would be better placed to “make those decisions without conflict”.
Partners were never told the details of these concerns and voted Mr Seymour as leader in March 2020. He stepped down from the position after the extent of the tax leaks matter was revealed by The Australian Financial Review in May 2023.
A spokesperson said Mr Sayers “had addressed each of these issues extensively, including the actions he took, and had nothing further to add”. Comment was sought from Mr Seymour.
The file note was among almost a dozen new documents related to the tax leaks matter released by the joint inquiry into the structure of the big four consulting firms on Friday. Another set of documents provided new detail of how PwC International seized control of PwC Australia due to the “ongoing reputational and global brand damage” of the tax leaks scandal.
The letters show that PwC International quickly determined that personnel at PwC Australia had made “false statements relating to assertions of attorney-client privilege” and breached the confidentiality of the federal government, and that its consulting arm had “been beset by poor risk management practices and actual or perceived conflicts of interest, [and] evidenced gaps in professional judgment”.
Another document provided more detail of the previously secret employment side agreement between Mr Burrowes and PwC International over his role as a representative of PwC International while also being the head of the Australian firm. PwC has previously resisted releasing this information.
‘Significant progress’
Mr Burrowes took more than a year to tell the firm’s leadership that he was being paid a minimum of $1.2 million, in addition to his pay of about $3.4 million from PwC Australia. The lack of disclosure was criticised by parliament and current and former partners as a conflict of interest between his duties to the Australian firm and the global network. Mr Burrowes has denied this.
PwC Australia CEO Kevin Burrowes. Alex Ellinghausen
A March letter from PwC International highlighted the firm had made progress on fixing issues within its governance and culture.
“As is well known already, the firm was put under remediation and the current letter from March this year shows that we have made significant progress in our transformation of the firm,” Mr Burrowes said on Friday. “Our leadership is focused on building a culture that PwC employees are proud of, while delivering excellent quality client outcomes.”
Labor senator Deborah O’Neill, who is the chairman of the joint inquiry, said Ms Beattie’s notes “further undercut former CEO Luke Sayers’ account of his engagements with ATO officials” and that PwC International had attempted to “firewall itself from the Australian firm and protect its global reputation”.
“These notes would seem to highlight the ethical apathy and failures of accountability for the misconduct which occurred on [Mr Sayers’] watch,” she said.
She also said that the PwC International letters showed the global entity threatened the “Australian arm with expulsion from the global franchise if it dared to freely co-operate with the legitimate inquiries of this parliament. This is a blatant and deeply inappropriate form of intimidation.”
Labor senator Deborah O’Neill. Alex Ellinghausen
“PwC’s claims of commercial confidentiality in a desperate attempt to keep these crucial documents confidential do not hold water,” she said. “These efforts are reminiscent of PwC Australia’s initial claims of legal professional privilege, through which they sought to evade Australian regulators and escape accountability for the tax leaks scandal itself.”
Greens senator Barbara Pocock said the documents “strengthens the case for an overhaul of governance in the big four”.
Senator Pocock said she wanted to see the firms have “new corporate obligations”, “limits on partnership size, and for the continuing exclusion of PwC from government contracting until all investigations and their findings are complete and fully implemented.”
The joint committee is expected to hand down its final report next week.
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