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A “six-year-old child of normal intelligence” would know what conspired at PwC was wrong, from the cover-ups to the hindering of the ATO’s investigation.
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PwC partners held ‘no regard for their obligation to confidentiality’
23 June 2023
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13 minute read
PwC partners held “no regard for their obligation to maintain the confidentiality of Treasury consultations and information” according to the senate committee’s report entitled PwC: A calculated breach of trust.
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The report revealed Peter Collins and “other PwC partners” possessed a desire to “aggressively monetise confidential Commonwealth information”, which put at risk $180 million per year of tax to be paid in Australia.
Treasurer Jim Chalmers said he was appalled by the findings of the report but said the parliament needed to be careful not to obstruct the inquiry by the Australian Federal Police.
“It is a deeply disappointing breach of trust, completely unacceptable, because what’s happened here is we’ve seen the consultation process trashed,” Treasurer Chalmers said on ABC radio.
“We do want to see more information and more transparency, it needs to be consistent with and not in the way of some of the other processes underway including the AFP referral from the treasury.”
“We need to know more information. We need to know much more about what’s happened here as part of our efforts to make sure it doesn’t happen again.”
The report said internal emails from PwC showed Mr Collins’ actions were known within the firm but there was no evidence that his colleagues had called out his behaviour until it became publicly known in 2023.
“PwC subsequently sought to protect its reputation by effectively stonewalling the ATO in its pursuit of documentation related to the misuse of confidential information by Mr Collins and other PwC partners,” said the report.
“Based on evidence from the ATO, it is open to the committee to conclude that PwC did this by the inappropriate and incorrect application of legal professional privilege to tens of thousands of PwC documents.”
The committee also found the firm in contravention of its legal obligations having failed to meet the requirement in section 30 of the Tax Agent Services Act to report any breaches or suspected breaches, by not reporting Mr Collins’ actions before the TPB commenced its investigation.
In its report, the committee said PwC’s response to the confidentiality leaks being made public was less than satisfactory, including PwC’s acting CEO Kristin Stubbins’ open letter.
“PwC has given every appearance of attempting to minimise the seriousness of the issue, hoping that standing down its CEO, Mr Seymour, and announcing the Switkowski review of PwC Australia’s culture, governance, and accountability, would suffice to assuage public concern,” said the report.
“The letter from Ms Stubbins conspicuously avoids addressing the key issues at the heart of the matter: the obvious conflict in an accounting, auditing, and consulting firm providing tax consultancy advice to government and at the same time providing tax advice to private sector clients; and the unlawful misuse of confidential tax information obtained through a process of providing advice to government, which was monetised for the benefit of the firm and its clients.”
The report also questioned the TPB’s actions and the timeliness of the investigations by it and the ATO and the confidentiality constraints which hampered the sharing of information.
“It is clear to the committee that the TPB found PwC would have, or should have been, aware of the perceived and actual conflict of interest which existed in relation to its duties and activities as a tax agent and that it failed to ensure adequate arrangements were in place to manage these conflicts,” said the report.
“Serious questions arise about the structural and dishonest nature of these conflicts, and the committee intends to consider this issue further during this inquiry.”
Associate professor of law at the University of Wollongong, Andy Schmulow said the committee’s findings should see both CAANZ and TPB take further actions against the PwC and those connected to the confidentiality breach or risk consequences themselves.
“After this, if Chartered Accountants Australia and New Zealand hasn’t initiated steps to strike from the roll every person at PwC connected with this scandal, then ASIC must exercise its powers under section 88B of the Corporations Act, and dissolve CAANZ,” said Dr Schmulow.
“So too with the Tax Practitioners Board. If after this they do not immediately suspend PwC’s tax practice, pending permanent de-registration, then Peter de Cure must be removed as chair, and the board of the TPB replaced immediately.”
Dr Schmulow said those found to have breached the confidentiality of the Commonwealth needed to face serious consequences instead of having it be used as a teachable moment.
“This is not a teaching moment,” he said. “These are not questions that could not be answered by a six-year-old child who hasn’t been raised by wolves.”
“A six-year-old child of normal intelligence would understand it’s wrong to lie, it is wrong to steal and you do the wrong thing when somebody gives you information and says this is top secret don’t share it with anyone and then you go and share it with anyone who’s willing to pay for it.”
The committee also expressed its displeasure with PwC for the way it had provided a list of the 63 names involved in the tax breach to the committee but had not revealed it to the public asking the committee to keep it confidential.
Despite stating it was aware of the public interest in knowing who was involved in the actions, the report said the committee did not want to risk the creation of a pool of evidence inadmissible in a court by being covered by parliamentary privilege.
It also called on PwC to release the information of the partners and their involvement as a way to help protect all its partners’ reputations from being tarnished.
“The committee concurs with the Clerk of the Senate’s view that PwC is best placed to minimise the reputational damage likely to flow to personnel that PwC says were only peripherally involved in the breach of trust,” said the report.
“To that end, the committee considers the onus is on PwC to promptly publish accurate information about the involvement of PwC partners and personnel in the interest of transparency and accountability it claims to be working towards.”
After seeing PwC’s cover-up attempts and lack of integrity in reporting breaches of its behaviour the committee had two questions of the firm.
“Is PwC’s internal culture so poor that its senior leadership does not recognise right from wrong, and lacks the capacity to act in an honest, open and straightforward manner?”
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