Senator Barbara Pocock Questions Treasury
Updated
PwC behind 15 schemes to sidestep tax, says ‘horrified’ ATO
PwC was behind 15 schemes designed to help multinationals sidestep tax laws, Commissioner Chris Jordan told a parliamentary committee late on Tuesday.
Mr Jordan also accused PwC of frustrating its investigations into these types of schemes – which, in total, put at risk $180 million in tax revenue a year – via “false claims” of legal privilege.
The ATO learnt that PwC partner Peter Collins had used confidential Treasury information to develop the schemes in late 2017.
This was months before Mr Collins, signed the last of three confidentiality agreements to consult on the new tax laws, in February 2018 when Treasury did not know about the ATO’s discovery.
ATO Commissioner Chris Jordan during a ATO senate estimates hearing at Parliament House. Dominic Lorrimer
Second tax commissioner Jeremy Hirschhorn said the ATO had the first hints in late 2017 that Mr Collins had breached confidentiality.
“By the start of 2019 we actually took an assistant commissioner offline…with a team of 20 or so staff were solely focused on dealing with these matters.”
But Mr Jordan said the ATO was prevented by outdated secrecy laws from informing the Treasurer of these developments.
The commissioner named three PwC clients that were involved in claims for legal privilege.
“The three companies…were all PwC clients that we’ve taken to the court and are public and that’s why we can mention Glencore...ABi InBev and JBS, the Brazilian meat processing [company],” Mr Jordan said.
In another development, Peter van Dongen, the former chairman of PwC’s board, and Paul Abbey, a tax partner at the firm, have both been removed from a website listing the firm’s governance board members, indicating they may have stepped down. The firm would not comment on the changes.
Earlier on Tuesday, officials from Treasury fielded a barrage of questions about their ongoing relationship with PwC, when they learned of the tax leaks and what they have done in response to the scandal. Defence officials were also grilled about the 54 contracts the department had with PwC, worth more than $223 million.
In his opening statement, Mr Jordan told the committee that the ATO became aware of a handful of multinationals trying to avoid the new laws in early 2016, which triggered audits.
“In January 2016, we became aware of a handful of multinationals suspiciously and quickly attempting to restructure their affairs upon the introduction of the Multinational Anti-Avoidance Law (MAAL),” Mr Jordan said.
“Within days of becoming aware, we commenced reviews and audits of those multinationals and issued three Taxpayer Alerts in 2016, putting all significant firms and taxpayers on notice.
“Our immediate action prevented any loss of revenue to the Commonwealth from a scheme to avoid the MAAL. We estimate the revenue at risk was $180 million annually.”
AFP advice sought in 2018
Mr Jordan also detailed how the Tax Office shared information with federal police in 2018 about Mr Collins leaking confidential Treasury documents.
This means the decision by Treasury head Dr Steven Kennedy to refer the PwC tax leaks scandal to the AFP is the second time the police have been called in over the matter.
Federal Police commissioner Reece Kershaw made no reference to the earlier consultation when questioned about the PwC matter at estimates last Thursday. The federal police decided to take no further action in 2019.
An AFP spokesperson said that the ATO only provided “representative sample documents” for assessment.
“The AFP assessed, based on the material that the ATO provided, was that there was insufficient information in the material, to support a formal referral.” the spokesperson said. “In consultation and agreement with the ATO, the matter was closed in 2019.”
Later, in July 2020, the Tax Office formally referred the matter to Tax Practitioners Board, which investigates members of the tax profession.
Mr Jordan also provided a timeline that showed that the ATO obtained a cache of PwC internal emails in late 2017, which showed that Mr Collins had shared confidential Treasury documents that he received with other PwC partners, who then used the information to target new clients.
It’s not clear which part of the ATO first obtained the emails, but their existence appears not to have been widely known in the tax regulator.
As a result, Mr Collins – who signed his first confidentiality agreement with Treasury in 2013 – continued to act as an adviser to Treasury on plans for new anti avoidance laws.
“Unlike many revenue authorities in other countries, we do not have criminal investigative powers. As the confidentiality breach was not a tax offence, we were unable to investigate the matter further and from 2018 we sought to refer this matter to the correct authority,” Mr Jordan said.
‘Circling like vultures’
Earlier in the day, Greens Senator David Shoebridge said it appeared PwC had been “circling like vultures” trying to win defence contracts. He said Defence was “far and away” PwC’s biggest government client, with contracts worth eight times more than the next nearest department.
The department’s associate secretary, Matt Yannopoulos, defended the volume of work that PwC had won, saying the military was undergoing a significant recapitalisation with new weapons and platforms.
“We are the largest project delivery organisation in the Commonwealth,” Mr Yannopoulos said. Mr Yannopoulos said PwC had twice offered written assurances that the 54 staff whose names have not been made public did not work on defence contracts.
On Monday, PwC acting chief executive Kristin Stubbins announced nine partners would go on leave pending further investigation, as part of a suite of measures to show the firm was taking decisive action over the tax leaks scandal. Ms Stubbins also announced that chairman Tracey Kennair and governance board risk chairman Paddy Carney had decided to step down from their roles
The nine partners were not named but are understood to include former executive board members Pete Calleja and Sean Gregory. The pair had earlier stepped down from their leadership roles at the firm. Separately from these nine partners, the firm has already announced former chief executive Tom Seymour will retire early from the firm in September.
With Andrew Tillett, Lois Maskiell and Campbell Kwan
