Jozef Imrich, name worthy of Kafka, has his finger on the pulse of any irony of interest and shares his findings to keep you in-the-know with the savviest trend setters and infomaniacs.
''I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can't see from the center.''
-Kurt Vonnegut
Lawyers and economists have long recognized that taxation affects business entities’ governance decisions, and these tax-induced distortions have motivated decades of calls for corporate tax integration. In Does the Corporate Tax Still Distort Organizational Governance?, Jason Oh brings fresh insights to these longstanding debates. Oh observes that publicly traded companies rarely organize as limited liability companies (or other noncorporate state-law forms), even though LLCs’ governance regime allows greater flexibility without changing the entity’s corporate tax classification (through a check-the-box election or under § 7704’s publicly traded partnership rules). As Oh frames the question, “Why are there so few public LLCs?” To explain this puzzle, Oh advances a “homogeneity hypothesis”: “public entities prefer homogeneous interests and therefore gravitate toward governance and taxation regimes that reinforce homogeneity amongst investors.” In a world where public companies have diverse stakeholders, allocating the firm’s residual value—and upside—in a block of small, standardized units just makes life simpler.
it doesn’t feel like the totality of what’s happening has really sunk in or embedded itself in the national political conversation as we sit here 12 days out from the end of voting. To recap for those just joining us, the Trump administration has used the false pretext of rampant noncitizen voting to:
gin up criminal prosecutions nationwide against noncitizens for alleged voting-related crimes, with a special focus on California, where it rolled out a bunch of dubious new charges with high-profile arrests and official press conferences two weeks before the election;
sue California to force it to segregate and not count mail-in ballots from alleged noncitizen voters until it undertakes some new, uncertain, and open-ended investigation into whether the voters are citizens;
send federal agents door-to-door looking for noncitizen voters in what is at best a fishing expedition and at worst a campaign to terrorize and instill fear in potential voters in minority communities.
All of this happening — and I cannot emphasize it enough — while universal mail-in voting is already underway in California.
The various ways in which the Trump administration spent the past several months trying to monkey with the midterms — asserting unprecedented federal control over state-run federal elections, attempting to use the Postal Service to throttle mail-in ballot delivery, demanding access to voter rolls and individual voter information; marshaling federal databases in a purported effort to ferret out noncitizen voters; among other things — was merely a prelude to its open attack on the midterms now ongoing in California. The breadth and persistence of those earlier efforts by the administration has probably dulled the senses a bit and made it harder to distinguish what it happening now as a more serious and immediate threat to free and fair elections.
The other complicating factor is that the fight to fend off the administration’s attack in California stretches from coast to coast, making it harder for reporters to cover it as a single unified story and for the public to grasp the various tendrils. There’s a major civil lawsuit underway in California and two separate important lawsuits in D.C. Plus the myriad criminal cases in California, which won’t be decided until after the election.
At the same time, federal grand jury subpoenas are still outstanding that demand voter information from California election officials. And amidst all of that the Trump DOJ continues to actively threaten California election officials with prosecution if they don’t capitulate to administration demands…”
The first independent report into the big four firm’s conduct is sceptical about promises of change. Plus: the fastest consultant over 5km comes from PwC.
Edmund Tadros
Welcome to Professional Life, our free weekly newsletter covering the latest news, moves, and partner promotions for consulting and accounting experts. Sign up here to get it direct to your inbox every Wednesday before it appears online.
This week: the first independent report into KPMG is sceptical about the firm’s promises of change, the Tax Ombudsman and the ATO disagree over the scale of tax complaints, and the fastest consultant of all.
The growing cost of KPMG audit leaks scandal
KPMG has missed out on Commonwealth contracts worth more than $60 million since agreeing to a ban on bidding for new work. Harry Afentoglou
He wrote it also exposed “serious ethical failings” in the firm’s senior ranks and broader culture issues and advised the Finance Department that the firm needed to do more (much, much more) before it could be trusted to bid for new government work.
As Rear Window’s dauntless Hannah Wootton reported last week, Watt “pointed out that KPMG had made similar promises [of reform] in response to earlier scandals, but these did not result in meaningful change.”
Watt recommended the ban stay in place until Finance “had independent verification that the reforms had not only been implemented but were also working”.
In response, Finance extended its ban on KPMG bidding for new government work until at least the end of February. Wootton highlighted that this was actually considered a win within the firm – there were fears the ban could have been “prolonged for a full year (it originally began in mid-June), or extended to include bidding on contract extensions”.
It was by far the toughest of the half-dozen or so investigations or reviews so far completed into the whistleblower’s allegations or the firm’s response. It is also tellingly the first one of those that wasn’t funded (even if indirectly, as in Chartered Accountants ANZ’s case) by KPMG itself.
The dense report, which considered a wide range of evidence, put some figures around the cost of the federal government ban (also replicated in some states).
Watt estimates “KPMG has lost a possible 44 new contracts” with the Commonwealth worth “about $31 million” between April and August.
“While this is no more than a ballpark figure, and Finance cautions that the value figures are much less reliable than the volume data, the picture is one of significant new business and revenue loss,” he wrote.
“When the impact of contract amendments is added into the model, the financial impact increases to $61.3 million ... over that period, with an actual value of $78.1 million versus forecast value of $139.4 million.”
He adds that this is likely a low-ball estimate: “If the losses from the bans introduced by the ACT, NSW, Queensland, Victoria and Western Australia (all of whom implemented similar arrangements to the Commonwealth) were factored in, the loss of business is expected to be significantly higher.”
And that’s all before the private sector costs – the greatest so far being Macquarie Group opting to stick with PwC for its $100 million-a-year audit.
KPMG held about $270 million in federal contracts when the ban was announced, while contracts worth an additional $330 million were set to expire on June 30. The firm originally agreed to the pause on new contracts in an attempt to avoid an indefinite ban, as happened to PwC during its audit leaks scandal.
Taxation Ombudsman Ruth Owen has revealed a surge in complaints to her office. Steven Siewert
The Australian Taxation Office has hit back at Tax Ombudsman Ruth Owen after her office reported 2376 complaints in the six months to September 30, insisting the true figure was about 1000 lower.
Ombudsman data, detailed in a twice-yearly report published yesterday, shows debt collection and payments accounted for 19 per cent each, followed by disputes over penalties and interest, representing 18 per cent of complaints.
More than three-quarters of debt collection disputes involved requests to waive general interest charges.
“Our latest complaint data shows more people are struggling due to the ATO’s debt collection activity or interest charges or simply need to resolve delays to payments they are due,” Owen says.
The ATO counters it received only 1358 complaints from the Tax Ombudsman during the period, a gap of more than 1000.
“The difference in complaint numbers is due to the Tax Ombudsman including complaints that are resolved by the Tax Ombudsman without any ATO involvement or do not relate to the ATO such as TPB [Tax Practitioners Board] complaints or state tax issues,” an ATO spokeswoman says.
The ATO also says 926 of the 1358 complaints were lodged with the ombudsman first before being transferred to the agency.
“These complaints are transferred to the ATO to resolve, and as noted by the Tax Ombudsman are partially driven by their efforts to raise community awareness of their service,” the ATO spokeswoman says.
Call for more women liquidators
Nine groups have joined forces to demand regulatory changes to increase the number of female registered liquidators.
Women account for just 70 of the roughly 660 professionals registered to act as liquidators or voluntary administrators. In personal insolvency, women account for just 36 of the 212 registered trustees.
The coalition is urging the government to amend two key rules.
The first extends from five to seven years the window for applicants to accumulate the required 4000 hours of senior insolvency experience.
The second introduces a new voluntary benchmark for Canberra to first offer 25 per cent of new government-initiated insolvency appointments to female practitioners.
The corporate regulator and the Australian Financial Security Authority have already adopted a 25 per cent target.
“The pipeline of professional women is not the problem,” says Shabnam Amirbeaggi, a liquidator and trustee who founded the working group advocating for reform. “It is the result of longstanding structural barriers within the profession, including accumulating hours in a senior role and the way insolvency appointments are offered.”
The nine groups comprise: the Association of Independent Insolvency Practitioners, Australian Restructuring Insolvency & Turnaround Association, Chartered Accountants ANZ, CPA Australia, Institute of Public Accountants, Ladies Insolvency Professionals, Turnaround Management Association Australia, Women’s Insolvency Network Australia NSW and Women in Insolvency and Restructuring Victoria.
Accenture lands Triple Zero trial as boutiques consolidate
The federal department of infrastructure has hired Accenture Australia in a $593,115.60 contract to test whether text messaging can reliably reach triple zero during carrier network voice outages.
Elsewhere in professional services deals, national accounting firm CAAA has absorbed Melbourne practice Avonlea Advisory, following its recent acquisitions of ALK in Victoria and Queensland-based EDR Accounting and Business Solutions.
“We are building a national firm with the depth to serve more complex clients, while preserving the personal relationships that distinguish strong independent practices,” says CAAA founder and chief executive Fleming Stojanovski.
Meanwhile, cybersecurity consultancy Island Bell has acquired Prevenance, bringing across founder Shannon Sedgwick. Sedgwick was previously a partner at MinterEllison and senior managing director at Ankura.
“Boards are being asked to answer for cyber and AI risk with the same rigour they bring to growth,” Sedgwick says.
Sebastian Asher, a 25-year-old associate in PwC’s Brisbane deals team, came second in the JPMorgan Corporate Challenge.
Seventy-four accounting and consulting teams completed the five-kilometre JPMorganChase Corporate Challenge last Wednesday.
A team of eight finishers from Codi, Project Pathway and Stride Talent placed third overall with an average time of 24 minutes and 26 seconds. The RBB Economics team of nine finished ninth (average time of 25 minutes and 53 seconds), ahead of Boston Consulting Group’s team of 10 at No. 11 (26m 18s).
EY placed 68th with 35 finishers (29m 5s), KPMG’s team of 56 placed 203rd (32m 6s) and Deloitte’s 49-strong team finished 230th (32m 44s).
PwC fielded the second-largest team of finishers – 285 out of more than 320 starters – averaging 34 minutes and 24 seconds to place 305th.
Individually, PwC deals associate Sebastian Asher finished second in 17 minutes. “I’ll definitely be back next year to see if I can go one better,” Asher says.
PwC partner Rob Spring, says the firm prioritised “vibes over times”.
“Nothing brings out the competitive spirit more – and that’s saying something, given the world we work in – than a friendly foot race around Centennial Park,” Spring says.
Reserve Bank senior health and wellbeing consultant James Nipperess won the race in a blistering 16 minutes and 31 seconds. Corrs Chambers Westgarth lawyer and former Olympian Georgia Winkcup recorded the top women’s time of 19 minutes and 8 seconds.
Host JPMorganChase had the largest team overall, with 433 finishing the race, averaging 39 minutes and 1 second to finish 433rd.
The new partners include former PwC deals partner Iain Yuile, former Deloitte M&A partner Alexandra White, former PwC director Priya Taliwal, former DLA Piper head of integrated M&A Guy Fisher and former DLA Piper principal adviser Simon Uykun.
“Significantly expanding the deals advisory practice in a single month is a statement about where Horizon Nexus Partners is heading,” says the firm’s co-founder Rob Silverwood.
He and co-founder Sanjiv Jeraj, both former PwC partners, want to build the firm into a 100-plus partner business with $400 million to $500 million in revenue within five years.
Other professional moves:
Well-connected KPMG partner and head of corporate affairs James Copsey is decamping for corporate advisory firm Sodali where he will take on the big role of senior managing director in its Victorian office.
Former KPMG partner Meg Brodie has joined climate and sustainability advisory firm Foresight Consulting as a director. Brodie was most recently the partner in charge of KPMG Banarra’s human rights and social impact practice and headed KPMG’s global business and human rights network.
Former KPMG partner Phil Thornley has joined BDO as a partner providing advice on data, artificial intelligence and business transformation.
Former BDO partner Marcus Leonard has joined Forvis Mazars as a partner and its national head of tax.
Former Deloitte and EY partner Richard Keany has joined Leaders On Demand as an executive adviser.
Consultancy Analysys Mason has opened a Sydney office, led by new partners Zia Bhadiar and Ryan Kelly.
David Alia has joined Bain & Company as an expert partner, having served as group chief product and technology officer at T-shirt Ventures and chief product and technology officer at PropHero.
Prosperity Advisers Group has expanded into human resources advisory, led by new director Dominic Roberts. He has more than two decades of experience in recruitment and executive search, including founding his own firm Talent Agility.
McKinsey senior partner Simon Blackburn has retired after 30 years. Blackburn is now an emeritus senior partner of McKinsey and will next year become the chairman of the Woolcock Institute of Medical Research. McKinsey partner Duncan Kauffman has departed.
#REF!
A regular look at the words and phrases professionals love to use, and what they’re really saying.
Meaning: It refers to experts sitting next to each other in court so they can provide evidence at the same time.
What it probably means: It can be awkward sitting next to other experts who may confidently deliver definitive but possibly contrasting, evidence.
The alternative: Stick to concurrent evidence, if only to spare all involved from someone taking it upon themselves to make an inevitably groan-worthy joke...such as asking someone to “pass the soap”. We’re here all week…
Thanks to HKA partner Sally Davitt for introducing the term to Professional Life.
