PwC scandal is only starting

The tax scandal at PricewaterhouseCoopers raises a complex range of serious issues, which are not going to even be addressed far less resolved anytime soon – if indeed, anytime ever.

Ziggy Switkowski will lead the review into PwC. Picture: John Feder

The tax scandal at one of the big four accounting firms, PricewaterhouseCoopers, raises a complex range of serious issues, which are not going to even be addressed far less resolved anytime soon – if indeed, anytime ever.

They certainly won’t be by the – firm’s own – appointment of one of our regular go-to ‘inquiry mavens’ and ‘hot potato juggler’, Ziggy Switkowski, to lead an “independent review of the firm’s governance, accountability and culture”.

This is not a negative comment on Switkowski; he’ll do the job with the integrity and efficiency of previous inquiries he has led, like into the Essendon Football Club drugs scandal.

He’s also shown both a willingness to, and a deftness in, juggling corporate hot potatoes – chairing the National Broadband Network, and more recently taking the chair at Crown casino, just as it was coming out of its own governance and money-laundering scandals.

Rather, while the PwC inquiry might be very necessary to get PwC ‘right’, to propose fixes for its “governance” and “culture” failings; it is completely beside the bigger point raised by the scandal.

It’s a scandal that flows from the massive integration we have between the Australian Taxation Office and tax practitioners in accounting firms, and especially the Big Four, where both the peak skills and the big corporate and personal tax dollars reside.

They have the skills to help the ATO and the underlying Tax Legislation and rules get things ’right’. That means legislation and tax practice that works – to do what it’s supposed to do, but also to do it efficiently.

So, on the one hand we have top people from the accounting firms advising the ATO and the government on how to frame the legislation and the tax rules, so they ‘work’; and then at the same time, advising their clients how to, bluntly, ‘get around them’.

It’s possible to envisage a reality where both can be done both effectively and ethically; if you assume that greed is not a significant motivator.

Whereas greed is actually the defining driver across the 21st century business sector.

You don’t last long as a partner at a Big Four accounting firm unless you deliver billings; and as a tax partner you deliver billings by delivering lower tax bills to your clients, not merely doing their tax returns in accord with both the letter and the spirit of the tax law.

What we saw at PwC – incredibly and disturbingly it took seven years to surface – was a ‘resolution’ of this challenge by doing both.

First off, advising the ATO on how to structure and implement new multinational tax avoidance laws; and at the same time, at the very same time, setting out to advise existing clients and win new clients, using that inside information on how to avoid those very same new avoidance laws!

A simple question: shouldn’t the advice to the ATO have been expanded to pre-emptively also attack the new avoidance practices being marketed to clients? In short, we need a far bigger and deeper inquiry into the whole mess of advisory and other financial relationships between accounting firms, the ATO and government more generally.