It has cost the chief executive of PwC Australia his job, nine partners are suspended on leave and tax advisers around the world are watching events closely. Now government officials are conferring with counterparts overseas to see if there were offences committed elsewhere.
The tax leaks scandal engulfing PwC in Australia raises a host of fundamental issues about the role of consultants in governments and the ethics of advisory businesses. It has undermined the reputation of PwC in Australia and could have an effect in other jurisdictions.
The latest news comes after Jeremy Hirschhorn, a commissioner at the Australian Taxation Office, told a senate hearing in Canberra that the authorities were looking at the possibility of “potential offences in other jurisdictions” linked to events in Australia.
Those stem from the action of Peter-John Collins, a former PwC partner, who was found to have leaked confidential information to colleagues about government tax policy while working on a confidential consultation for the Australian Treasury.
Collins was banned from working as a tax advisor by the Australian Tax Practitioners Board in January this year. At the time, the board’s chair, Ian Klug, said leaks could be seen to “elevate personal and commercial profit” but were also “breaching public interest, legal and ethical obligations”.
PwC said in May that nine partners had been directed to go on leave, pending the outcome of its own internal investigations. Two new non-executives were appointed to the firm’s governance board after its chair and risk committee members stepped down. The firm is also ringfencing work for Australia’s federal government, in a bid to reduce conflicts of interest.
Last month, PwC’s chief executive, Tom Seymour, stepped down, while the Australian Treasury has referred the matter to the police. Treasury head Steven Kennedy has described the issues as “clearly disturbing” .
The firm has been under pressure to name those who received emails from Collins containing leaks. But it insists “the vast majority of the recipients of these emails are not responsible for, nor were knowingly involved in any confidentiality breach”.
“We understand that we betrayed the trust of our stakeholders and we apologise unreservedly.”
The debacle turns a spotlight on tax consultancy provided by big firms. Richard Murphy, a professor of accounting at Sheffield University, told Bloomberg: “There’s fundamental conflict between governments’ reliance on big accounting firms for tax advice when these same firms are advising companies on how to avoid these taxes.”
The UK has been through its own soul-searching on this issue. In 2013, the House of Commons public accounts committee published a report on tax avoidance and the role of large accountancy firms. It expressed concern about tax experts from large firms helping their clients after working for government.
The report reflects, “We have seen what look like cases of poacher, turned gamekeeper, turned poacher again, whereby individuals who advise government go back to their firms and advise their clients on how they can use those laws to reduce the amount of tax they pay.”
As experts consider the PwC case, the question will be whether information gleaned by Peter-John Collins could have been used by companies elsewhere in the world to exploit the Australian tax system. That remains unanswered for the time being, but investigations continue.
What is clear is that a Big Four firm has become embroiled in yet another ethics scandal.