PwC takes 26% revenue hit from tax leaks scandal
A new report reveals scandal-induced losses, partner pay cuts and high employee turnover.
PwC Australia has posted a one-quarter drop ($820 million) in revenue to $2.35 billion as it counts the cost of righting itself over one year since the tax leaks scandal erupted.
The embattled big four firm also cut partner pay by 13 per cent and faced employee turnover of 32 per cent in the 12 months to June 2024, according to a transparency report released on Tuesday.
Chief executive Kevin Burrowes said the results reflected a difficult year for the firm.
“While certain metrics are not where we’d like them to be, they reflect the challenges our people and firm have faced as we continue to rebuild trust, the impact of the divestment of our government consulting business and the challenging economic environment all businesses face.
“I want to thank our people, partners and clients for their support during a year of significant change. I am immensely proud of the progress we have made, recognising there is a lot more to do.”
Revelations in early 2023 that the firm abused confidential Treasury tax briefings triggered an unprecedented industry crackdown as well as the government pulling back on the use of big four consultants.
In June 2023, PwC sold its public sector consulting arm to Allegro Funds for $1. By November, more than 1,400 partners and employees had transferred to the spin-off Scyne Advisory.
In March 2024, it announced it had cut 329 staff including 37 partners in a bid to save around $100 million in costs. It currently has 655 partners, down from 882 last year.
“Across the year, we also announced steps we were taking to adjust our workforce to address our change in portfolio and strategic focus, as well as economic and business headwinds,” the firm said.
“This unfortunately meant we had redundancies in some areas.”
The costs of dealing with the scandal’s fallout have been compounded by a downturn in the professional services industry after a pandemic boom.
PwC’s consolidated revenue decreased 26 per cent to $2.35 billion in the 12 months to June 2024 ($2.48 billion with disbursements included), down from $3.17 billion in 2023.
EY has announced a 5.5 per cent revenue slump to $2.81 billion, while Deloitte saw its earnings fall 2.4 per cent to $2.78 billion, and KPMG was down 3.9 per cent to 2.39 billion.
PwC said annualised partner pay declined by 12.7 per cent, while staff received $33 million in incentive payments.
Despite adding 1,296 new employees (including 691 graduates) to the firm, it also reported a 32 per cent turnover of its employees, up from 19 per cent in 2023.
Internal surveys also revealed the number of respondents who felt a sense of pride working for the firm dropped from 76 per cent to 61 per cent.
Burrowes said that “new business strategy and structure, a new leadership team, a new board, new risk systems and new accountability measures” meant the firm was “changing for the better”.
This included achieving a 100 per cent completion rate for its TPB-mandated ethics and code of conduct training, according to chief risk and ethics officer Jan McCahey.
“I am grateful to our people who have called out unacceptable behaviours, for speaking up and contributing to the positive change we want to see at our firm,” she said.
But questions remain over PwC’s ethics and culture, with lawmakers during parliamentary committees in recent months accusing the firm of “thumbing their nose” at Parliament as it continues to withhold a global report on the tax leaks scandal.
Burrowes has also faced criticism over concealing the fact he was receiving a $1.2 million annual payment from the PwC International for almost a year.
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