Senate report delivers ‘striking’ findings into PwC scandal

A Senate inquiry investigating the recent PwC tax matter has found that PwC failed to recognise and manage conflicts of interest, reflecting “poor corporate culture and a lack of decent governance and accountability”.

The report which was handed down yesterday follows its inquiry into the PWC tax scandal involving the breach of confidential Commonwealth information by former PwC partner Peter Collins.

Clear conflict of interest issues

The report found that Mr Collins’ involvement with Treasury and the Board of Taxation placed him in a conflicted position.

“This conflict arose due to the potential market advantage of PwC and Mr Collins having knowledge of this confidential information and the fact that it could be utilised to advance the position of PwC's existing taxation clients as well as marketing its services to attract new clients,” the report stated.

It also found that Mr Collins intentionally shared confidential information obtained through Treasury consultations with PwC parts and personnel in Australia and overseas.

“In sharing this confidential information, Mr Collins sought to assist existing and potential new clients of PwC to avoid the soon to be introduced Multinational Anti-Avoidance Law (MAAL) in 2016,” the report said.

“This put at risk $180 million per year of tax to be paid in Australia and generated new income of at least $2.5 million for what PwC envisaged would be the first tranche of its services to those clients.”

The Senate Committee found that Mr Collins and certain other PwC partners had no regard for their obligation to maintain the confidentiality of Treasury consultations and information.

“Equally, their desire to aggressively monetise confidential Commonwealth information demonstrates no regard for the public interest and the efforts of the then government to prevent multinationals from using complex and artificial structures to escape paying their fair share of tax in Australia,” the report said.

“It is clear that the desire for personal gain trumped any obligations that PwC had to the Commonwealth of Australia and its citizens.”

Mr Collins’ actions “supported and condoned” by PwC

While Mr Collins was a central figure in these events, it is evident from the internal PwC emails brought to light through Senate Estimates that his actions were understood to be problematic for PwC if ever made public, and yet were supported and condoned within PwC.

“There is no evidence that PwC colleagues or leaders called out this behaviour for years, up until it became publicly known in 2023,” said Mr Collins.

“Indeed, 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. 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.”

Deliberate strategy to cover up breaches

The Senate Committee said it is aware that several other partners at the firm were involved in the breach of confidentiality.

“This indicates that PwC should have self-reported several other breaches but failed to do so,” it stated.

The Committee stated that two aspects for PwC’s approach were particularly striking.

“First, the incorrect application of legal professional privilege to tens of thousands of potentially incriminating documents. And second, the conspicuous failure to report a serious breach of confidentiality when PwC had a legal obligation to do so,” it stated.

“Taken together, the committee concludes that PwC engaged in a deliberate strategy over many years to cover up the breach of confidentiality and the plan by PwC personnel to monetise it.”

“It stretches credulity that the senior leadership of PwC were ignorant of all this. The application of legal professional privilege to large volumes of documents must have had approval from the most senior levels within PwC. Former CEO Mr Seymour has confirmed that he received emails from Mr Collins related to the confidential Treasury information.”

The recent response from PwC has also been found to be less than satisfactory.

“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.”

The recent letter from acting chief executive Kristin Stubbins 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, it said.

The Committee also questioned whether PwC's internal culture was 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”.

“As a tax agent and a provider of consulting services for government, PwC is in a fundamentally conflicted position. PwC's failure to recognise and manage this conflict speaks to poor corporate culture and a lack of decent governance and accountability,” the report stated.

In its concluding remarks, committee called on PwC to cooperate fully and openly with all investigations and inquiries into this matter, including the investigations by the Australian Federal Police and the Tax Practitioners Board.

It also recommends that PwC be open and honest with the Australian Parliament and people, and with the international community, by promptly publishing accurate and detailed information about the involvement of PwC partners and personnel (including names and positions) in the matters canvassed in this report.