Bigger issues in PwC scandal

Two much bigger, far wider and far more fundamental points have got lost in the understandable furore over the PwC tax scandal.

PwC offices at One International Towers, Barangaroo in Sydney. Picture: John Feder

Two much bigger, far wider and far more fundamental points have got lost in the understandable furore over the PwC tax scandal.

Yes, we’ve seen precious little enough exposed and detailed forensic investigation into what PwC did – and no, it was not just one ‘rogue’ partner aiming to be the ‘smartest and richest guy in the room’.

It probably seemed like a – very – good idea at the time, back in the mid-2010s: provide insider expert advice to the ATO (the Australian Taxation Office) on drafting anti-tax avoidance legislation; and then use the knowledge to advise global multinationals on getting around the new anti-avoidance legislation.

The belated and limited revelations about all this – the bad behaviour happened nearly a decade ago, bits of it have only surfaced now – demands a really major and public investigation.

This needs to focus not just on the specific murky issue – yes, it might be not just a good but even unavoidable idea to get the top tax advisers to advise on complex tax legislation.

But please, are these tax practitioners really supposed to do their damnedest to utterly and permanently destroy their own businesses and incomes?

And who – for want of a better word – ‘audits’ what they advise?

But such an inquiry has to go much deeper and wider – into the entire multi-billion-dollar-a-year business that consultancy advice to governments and the bureaucracy has become.

And advice which has to use the very experts, which and who will be the main beneficiaries of that advice in their private sector roles!

Staggering conflict of interest anybody?

Further, we are now also paying – and very expensively – twice for what we used to get from a much less remunerated professional public service.

And doing so, at both state and federal level.

I’d have to say, the PwC debacle suggests we – the actual, real taxpayers – are not getting much value for the billions we pay for this sort of ‘advice’. For clearly – on PwC’s own post-advice behaviour – the anti-avoidance legislation that PwC and the other ‘experts’ helped come up with was largely or even totally ineffective. In going straight out after the event and marketing to clients how to get around the anti-avoidance legislation they’d just helped craft, PwC was announcing its own advisory ineptitude.

This is one huge issue: the mind-boggling scandal of useless consultancy advice to government. On top of a bloated, overpaid, and seemingly similarly useless public service. The other is whether it is now beyond time to ditch corporate income tax – the very existence of which is the bread-and butter of this huge, in itself multibillion-dollar, avoidance industry – and replace it with a sophisticated but simple turnover tax. Do we want to endlessly engage in this two-step charade?

The ATO calls in the smartest guys in the room to advise on structuring anti-avoidance legislation. They say, thank you very much: we now have a new income stream – advising clients how to avoid the new anti-avoidance rules.

Rinse and repeat. Endlessly.

Most of it would go away with a straight tax on company turnover – which the ATO tries to do in a weird way anyway.

Originally published as Bigger issues in PwC scandal