PwC Australia faces partner exodus amid tax crisis

PwC Australia faces the exit of 70 partners from its business this financial year, in addition to the 130 set to move to a new private company, as the firm battles to cut costs in a falling market.

PwC Australia faces the exit of 70 partners from its business this financial year, in addition to the 130 set to move to a new private company, as the firm battles to cut costs in a falling market according to information released after a partner meeting on Wednesday.

The remaining partners with PwC Australia are expected to see income losses of at least 20 per cent next financial year, as a result of the firm’s announced exit from government consulting, which has contributed 20 per cent of its annual $3bn a year in revenues.

The number of retirements and early retirements, in a partnership which once topped more than 900, was released at a meeting of PwC partners on Wednesday afternoon.

This on top of some 130 partners who are set to move to a new private company, backed by private equity firm Allegro, which will focus on government business.

A PwC spokesman said the number of partners leaving this year was only slightly higher than the 60 who left last financial year.

The moves are also believed to be separate to any moves against specific partners who may be found to be involved in the tax leak scandal, which was led by former head of international tax, Peter Collins.

The firm’s acting chief executive, Kristin Stubbins, told a parliamentary committee this week she expected there would be further announcements as the firm investigated the full extent of the involvement in the tax leak scandal, covering information used by the firm as a result of confidential dealings with the Australian Tax Office in 2015.

The announcement of the latest figures on partner retirements came following discussions with individual partners about the prospective income in their divisions.

The slowing of the economy has hit the firm’s business, in addition to increasing reputational damage from the tax leak scandal that had already led to a suspension of new government business.

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The development follows increasing uncertainty among staff about their future at the firm as it battles the ongoing fallout from the scandal. Further scrutiny from government committees is expected with 1500 staff involved in the proposed spin-off of the government business digesting the news this week that they had no alternative but to leave the firm.

“At the end of each financial year, we have partners leave the firm and retire from the partnership,” a spokesman said.

“We have had a slightly higher than average number of departures and retirements during the year, but our partnership has also grown during that time.”

Partners on the call were told that current expectations were that the income available for the total partner pool next financial year would suffer a 20 per cent fall compared with this financial year.

More senior, higher income earning partners will take a greater reduction in their income than junior partners.

The firm’s incoming chief executive, Kevin Burrowes, who is based in Singapore, has been in Sydney for a few days, having informal discussions with staff while he awaits the processing of his visa.

“Kevin is currently working through his visa application process and looks forward to resettling in Sydney as soon as possible,” a spokesman told the Australian.

“He is spending some time in Australia between now and then doing some informal meet and greets with partners. Until Kevin’s visa process is complete, Kristin Stubbins remains as acting CEO for the Australian firm.”

The Australian this week received a leaked emailed question and answer reportedly sent to affected staff who work on government consulting, about the proposed deal with Allegro.

PwC said it would refuse to confirm any leaked or allegedly leaked documents.

The question and answer told the staff involved that they could join Bell, resign from PwC or apply for a new role within the firm, but their future in government consulting with PwC was coming to an end.

The future of a smaller number of staffers and partners who handle a combination of government and private sector work, mainly in the infrastructure sector, is still being negotiated.

The total number of staff expected to transfer to Bell could be as high as 2000 but is expected to be around 1750.

People moving to the new company, including some 130 partners, will not receive any ongoing payments from PwC, which has been the case for partners retiring from the business, as both sides want to keep the Bell staff free from any ongoing payments from PwC.

But the details of any financial payouts from PwC to departing partners are still being negotiated.

A PwC spokesman denied reports that the broader payment scheme to retired partners was being axed.

As negotiations between private equity firm Allegro and PwC continue around the clock to finalise the deal, it is understood that basic relations between PwC and Allegro are good – with both sides wanting to get the deal done as quickly as possible – but there are still negotiations on which staff will come across to Bell.

Senator Deborah O’Neill. Picture: NCA NewsWire / Martin Ollman

There is also uncertainty as to the payout individual staff will get as they leave.

One anonymous staffer posted that they felt like “inventory that’s been sold so we have to deal with it”.

Meanwhile, Labor Senator Deborah O’Neill said parliamentary committees would continue to investigate PwC and the broader consulting profession in Australia.

She said there was currently no level of trust in any assurances given by PwC executives to government, including over handling potential conflicts of interest.

She said the Department of Health and Aged Care was currently examining whether there was any conflict of interest in PwC’s current advice to the government over aged care pricing and its advice on issues of pricing to private companies involved in the age care market.

She said she was worried about the potential job losses at PwC as the firm battles to cope with the crisis.

“But I am not responsible for that. The people who created this – it seems to me – are looking to try and escape, and that cannot be allowed to happen.

“There is a lot of bleeding out from this situation and there is an attempt to cauterise the wounds, but the reality is we know from sources inside with PwC that there are people who don’t believe that enough is being done,” she said.

She said she had communications from former PwC partners who had “absolute contempt for the way of doing business which has been revealed at PwC through the findings of the Senate”.

“They had their suspicions, they had raised concerns and could see that PwC was going the wrong way and away from professional and ethical behaviours and their concerns fell on deaf ears.

“This group of former and current partners who believe in ethical behaviour are disgusted at the trashing of a brand that many of them have given their lives to.”