It’s all hands on deck at the global top of accounting firm PriceWaterHouseCooper (PwC). The firm is doing everything it can to defuse the international ramifications of a major Australian trust issue.
The scandal revolves around confidential documents from the Australian government, which were allegedly used by partners of PwC to approach new clients in the tech sector for tax advice.
The government documents detailed what the new Australian tax evasion laws and regulations would look like. This enabled PwC clients to start thinking about financial constructions even before the legislation came into effect in 2016. The issue came to light during a Senate hearing, where internal correspondence from PwC was revealed.
PwC had access to the confidential documents as an advisor to the Australian Department of Finance. A PwC partner with a decades-long track record would have shared the documents with his colleagues, who then passed them on to potential clients.
Customers in US
The internal emails then found their way to colleagues in the United States, Ireland and the United Kingdom. The American customers in particular would have been lucrative in this regard: millions in new services would have been issued to companies in San Francisco. It is not yet clear whether and how many customers would have made illegal use of the information.
The PwC partner alleged to have leaked the documents was part of a team of accountants that provided advice to the Australian Treasury Department. He had signed strict confidentiality agreements. After the scandal came out, the man was banned from working in Australia for two years. He no longer works at PwC.
The matter is very sensitive at the accountancy firm, which has been putting the concept of ‘trust’ at the center of its business strategy for several years after a number of scandals. The fact that this is happening in Australia in particular is extra painful. The country presents itself as a forerunner in the fight against tax evasion, but despite strict legislation, it was unable to get a grip on multinational companies that found ways to pay no or less tax.
Top man Tom Seymour of the Australian branch of PwC already had to clear the field about the issue, but that is not enough for Australian politicians.
Labor Senator Deborah O’Neill is demanding that the names of all partners who sent the emails and the companies that received them be made public. “This is not about a few bad apples. It is a widespread cultural problem that extends far beyond Australia,” O’Neill told the British business paper. Financial Times
If O’Neill has her way, the issue could take on an international tail. Something that PwC wants to avoid at all costs. On Friday, a top-heavy PwC delegation boarded a plane to Sydney, including PwC’s most senior lawyer and chief tax adviser. The top delegation would like to try to calm things down on the spot – and at the same time get a picture of the scope of the corporate culture that O’Neill outlines. PwC has now launched an independent investigation into the state of affairs in Australia.
Names may be public
According to sources at the Financial Times PwC would also be preparing to approach customers who may be involved in the case. There is a chance that they will soon hear their company name during hearings in the Australian Senate.
Although Australian politicians are now pointing out the role of accountants in international tax evasion efforts, relations between accountants and government have been very close in the past.
The new government under Prime Minister Anthony Albanese is currently working on regulations to reduce dependence on the ‘Big Four’, the accounting firms KPMG, EY, PwC and Deloitte.
A version of this article also appeared in the May 13, 2023 newspaper.