Accountants’ industry group raises concerns over Treasury’s response to the PwC tax scandal

The draft legislation governing consultancy behaviour has just been released and Chartered Accountants Australia and New Zealand is concerned some measures might go too far.

The key accountants’ industry group has raised concerns about Treasury’s response to the sensational tax leaks scandal that has critically damaged one of the government’s top consultants, PwC Australia.

Late Tuesday, the government released draft legislation which could result in major consultancy firms receiving fines of up to $780m for tax promoter breaches, while the Australian Taxation Office and the Tax Practitioners Board would be given expanded roles.

Chartered Accountants Australia and New Zealand said stakeholders have not been given enough time to properly respond to Treasury’s plans but raised the question of whether some of the measures would go too far and if the regulators would have enough funding.

“A revamped, published strategy explaining how the two regulators will avoid duplication and streamline their interactions with busy tax professionals should be fast-tracked,” said Chartered Accountants executive Simon Grant.

“The risk of over-governance must be front of mind for those officials charged with implementing and managing the government’s proposals.”

The once-secretive workings of tax consultants and auditors exploded into the public consciousness earlier this year when PwC was found to have deliberately shared confidential information the government gave it as part of its advice on the so-called Google tax, and used this information to pitch to international companies how to avoid paying Australian tax.

PwC initially tried to blame one rogue partner but a Senate investigation revealed 63 partners and staff from Australia and offshore received information pertaining to the plan; and that a special cross-border group known as Project North America had been set up to capitalise on the leanings.

Chartered Accountants Australia and NZ executive Simon Grant. Picture: James Robertson

Under government questioning, the ATO and the TPB revealed they had been unable to share information at various times with each other or the government about the suspected PwC breach because of secrecy laws.

Treasury said it would amend the secrecy provisions that apply to the ATO and TPB.

“The PwC matter has highlighted that the ATO and TPB secrecy laws can prevent the regulators from disclosing serious misconduct even where it would be in the public interest to do so,” said Treasury in its draft proposal.

“The reforms will enable any similar misconduct to be reported and acted on in a timely way.”

The draft rules include greater information-gathering abilities for the ATO and increase the time it can take for court action on penalties – from four years to six years after an event has occurred. The TPB will provide greater information about tax agents that have be fined and its investigation time limit will be doubled to two years.

Some of the changes appear designed with the PwC in mind, such as the definition of “promoter” being expanded to capture those which receive “benefits” from their promotion of a scheme, according to the Treasury draft proposal.

The term “tax exploitation scheme” would be broadened to cover schemes that breach, or would breach, the multinational anti-avoidance law or diverted profit tax rules, Treasury said.

Mr Grant said his industry group welcomed the changes to secrecy provisions but cautioned against excluding consultants and accountants from future tax advisory work.

“The proposals rightly increase the sanctions for breaching confidentiality agreements, but this must be moderated by steps to maintain and support frank consultations with private sector subject matter experts,” Mr Grant said.

“Such dialogue remains vital to the development of well-drafted, workable legislation and related ATO guidance products.

“Also yet to be debated is the broader question: which types of government consultation are appropriate to conduct behind closed doors in the first place?”