Proposal to ‘ring-fence’ government work fails to impress the critics

PwC’s move to ‘ring-fence’ its government work unit amid the confidential tax leaks crisis is not seen as doing enough to avoid Canberra’s unofficial ban on new work.

Embattled professional services firm PwC will “ring-fence” business from the federal government – its largest client in Australia – in an attempt to avoid an unofficial ban by Canberra over the leaking of confidential tax briefings.

But policymakers and academics say the latest move to control the damage and offer some transparency is just the beginning of what the firm must do before winning contracts again, and it comes a little too late.

“PwC is scrambling to remediate the impact of its appalling behaviour but it’s too little, too late as far as I’m concerned,” Green senator Barbara Pocock said. Senator Pocock is calling for a broad inquiry to determine the level of involvement of every individual implicated in the leaks and doesn’t believe an internal inquiry at PwC will deliver full accountability.

PwC and its former head of international tax, Peter Collins, were formally referred to the AFP by Treasury on Wednesday, amid a probe into the leaking of confidential tax briefings by Mr Collins, which enabled the firm to construct strategies for its clients to minimise tax obligations.

Senator Pocock said she wanted to see the outcome of that investigation or an inquiry by the National Anti-Corruption Commission before any more government contracts were awarded to PwC. “Ring-fencing’’ government work to protect it from conflicts of interest was totally unacceptable,” she said.

Labor senator Deborah O’Neill said that after months of obfuscation by PwC, the firm’s move towards accountability was “more damage control and it’s certainly not transparency. This is completely driven by dollars and cents,” she said.

PwC’s revenue from government contracts last year totalled $530m, but the Department of Finance last week effectively banned the firm by instructing officials to consider breaches of confidentiality when assessing bids.

On Monday, PwC’s acting chief executive, Kristin Stubbins, issued an apology on behalf of PwC “for sharing confidential government tax policy information and for betraying the trust placed in us”.

In an open letter published on the firm’s website, she said the findings from a review of its governance, accountability and culture, due in September, would be made public, reversing an earlier plan to publish only a summary.

Nine unnamed partners have been put on leave, and two of the firm’s top chairs have stepped down – to be replaced by independent non-executive directors. She said the firm would ring-fence all federal government work by September.

“It will cover all services to federal government departments and agencies, include people, operations and governance within its perimeter and be operationally ring-fenced from other businesses within PwC Australia,” she said.

The Commonwealth business unit would have a standalone executive and governance board with responsibility to consider the strategic options for the business. “This will establish independence and enhance controls relating to confidentiality and conflicts,” she said.

Melbourne Law School professor Ian Ramsay said the move was “a start” but it was not a total solution to managing “significant” conflicts of interest and culture problems within PwC. He said the proposal to ring-fence Commonwealth work contained insufficient detail. “This is largely about damage control but it’s a start,” Mr Ramsay said. “Commonwealth work is extraordinarily important to PwC in Australia … (but) there are significant issues unresolved.”

In her open letter, Ms Stubbins tried to minimise potential reputational damage to clients that had used the firm for tax advice, saying that “no confidential information was used to enable clients to pay less tax” and said clients “were not involved in any wrongdoing”.