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PwC headquarters building in Melbourne Victoria Australia - AccountingWEB PwC Australia tax scandal deepens as firm offers up names to stem bleeding
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PwC Australia tax scandal deepens as firm offers up names to stem bleeding

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At least 67 current and former PwC Australia staff involved in the leak of sensitive government tax plans have been named in an unpublished letter to lawmakers in advance of forthcoming parliamentary hearings.

6th Jun 2023
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The Big Four firm is struggling to contain the fallout from the scandal, which erupted after a former partner who was hired by the federal government to shape corporate tax laws shared the confidential drafts with colleagues who used them to win business.

In May, a tranche of partially redacted emails revealed dozens of staff across the UK, US, Singapore and the Netherlands were helping multinational businesses avoid a new Australian tax law.

A number of senior leaders at PwC Australia have stepped down, including the company’s chief executive, Tom Seymour, whilst at least nine partners have been suspended and international executives have flown to Sydney to assess the damage of the brand.

In January, the partner at the centre of the row, Peter Collins, had his registration as a tax agent terminated for leaking the intelligence to colleagues around the world who then helped clients minimise their tax liabilities.

His name, along with three other former partners, was handed to a senate committee overseeing the probe.

According to the Australian Financial Review, PwC also offered up a separate group of 63 current and former partners who received at least one email containing confidential information relating to Australia’s 2016 Multinational Anti-Avoidance Law

Those named did not necessarily know about the confidentiality breach.

A group of partners at the firm have reportedly hired a crisis communications specialist to advise them ahead of their grilling by lawmakers.

Snowballing crisis

PwC has said that it is “deeply disappointed” by the actions of its former partners and is cooperating with Australia’s tax watchdog.

Australia’s largest pension fund has halted all work with PwC, indicating the firm’s actions to stop the damage from engulfing the wider business may be too late. Industry body Chartered Accountants Australia & New Zealand has also opened an investigation into the PwC matter.

Attention is also turning to the firm’s activities in the UK and UK, given colleagues in these jurisdictions shared the confidential data.

UK efforts to reform the top end of the audit and consultancy sectors by forcing the Big Four to split both arms are ongoing following longstanding conflict of interest concerns.

Last year, US regulators opened an investigation into the quality of audits carried out by large accounting firms in regard to the consulting services they provide to the same firms.

The PwC Australia scandal has put the ethics of the profession under the spotlight again, and the firm’s reputation may not recover, experts said.

Obvious conflicts

“Questions are now being asked about the obvious conflict of interest presented by large global consulting firms like PwC that wear multiple hats depending on what services are required from them,” said Rui Rong Lam, Asia-Pacific regional legal counsel at Oracle. “Identifying and managing conflicts of interest is essential to maintain ethical integrity and preserve trust.”

The predicament points to a “broader paradox” in the Big Four, said Jon Bradshaw co-founder of the Project Alpha Plus business innovation advisory and think tank.

“While they market themselves as experts in strategy, governance and risk management, the PwC scandal shows they can sometimes be surprisingly bad at all of these as applied to themselves,” he said. He also questioned why nations such as Australia rely on the likes of PwC over their own public servants.

“Under ‘capabilities’, the firm lists a grab-bag of broad service lines that include assurance, consulting, legal, human resources, technology, infrastructure, deal-making, ‘Business Align & Connect’, and of course, tax-related services,” he said. “Starting from their unglamorous origins in auditing and accounting, the Big Four have expanded into new businesses seemingly without limit.”

Echoes of Enron

Given the pace the scandal is continuing to grow, and PwC seemingly unable to reverse the tide, legislation may arrive sooner rather than later, said Australian chartered accountant Arun Chacko, partner at Chacko Business Consultants.

“I think there will be a renewed push by the regulators, politicians, media and the public at large in Australia to separate audit, tax, consulting, and other divisions into separate firms to minimise risk and prevent another Arthur Andersen/Enron situation from happening,” he said.

Arthur Anderson was the fifth member of what was the Big Five until its questionable accounting practices were unearthed in the spectacular 2001 collapse of energy company Enron.

While calls for clearer lines of accountability between advisers and corporations are inevitable, “regulation on its own does not change behaviour or motive”, added Tim Richardson, director at leadership development experts Waverley Learning Ltd and a former PwC director.

He said the firm may be facing “an existential crisis” given senior management would have been fully aware of what was happening.

“The consequences will be significant and far reaching for PwC,” he said “The temptation to hurry to find a ‘fix it’ solution should be avoided. What is needed is depth of reflection and understanding that leads to genuine ownership and commitment.”

Replies (3)

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By Justin Bryant
06th Jun 2023 11:48

When these corporate scandal things happen you'll find that the powers that be will quickly and desperately throw as many people under the proverbial bus as it takes to try make the problem go away and to save the institution and its massive money making abilities for everyone else not tainted. Like with the recent CBI boss thing. (And possibly also Phil Schofield who hasn't done much if anything wrong from what I can tell.)

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By Hugo Fair
06th Jun 2023 14:49

Quite. The one common factor across all 3 of the examples you mention (and most others out there) is their willingness to be 'tried in the court of public opinion'.

The reality is they've engineered it that way, because it suits them (corporations and 'star players' alike) ... it's an arena that they understand and can largely control through PR, advisors and loads of dosh.

Truth sailed a long time ago (taking integrity and the rest of the band on a one-way ticket to parts unknown).

And to bring it full circle, that approach now infects HMRC (along with the rest of national & local govt - see the brewing TeesWorks scandal).

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By moneymanager
07th Jun 2023 16:36

PWC must surely have assisted in the design of tax incentives for R&D, I know someone in PWC who's job it is to find clients to take advantage of it. It can't be surprising that tax incentives are so complicated and thus underutilised by the tax payer unless they engage a speccialist practionner?

I used to be all in favour of the public sector using the skills of the private, what we have ended up with is an increasingly incompetent and enfeebled public sector and a wholly incenstuous and simulataneous cross channel relationship as well as the "revolving door" of game keeper becoming the poacher of which a good example accross the pond of Monsanto's chief Counsel becoming the head of the FDA or in the "truth" industry of the head of Reuters sitting on Pfeizer's Board.

‘Something is rotten in the state of Denmark,’ a Hamlet quote is superficially saying that something bad is happening in the country however, the line heralds two basic things about the text. The word “state,” points to the body politic: the play has a strong political element, and the word “rotten” indicates a corroding, decaying, unhealthy condition.

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