PwC tax scandal a wake-up call

As Treasury considers whether to use PricewaterhouseCoopers Australia – its current auditor – for future contracts, the seriousness of the chartered accounting and consultancy firm’s wrongdoing has been underlined in an apology from acting chief executive Kristin Stubbins. “I want to apologise on behalf of PwC Australia. For sharing confidential government tax policy information and for betraying the trust placed in us,” she wrote. “I apologise to the community; to the Australian government for breaching your confidentiality; to our clients for any questions this may have raised about our integrity and trustworthiness.” Investigations were under way, Ms Stubbins said, but “we know enough about what went wrong to acknowledge that this situation was completely unacceptable”.

PwC has ordered nine senior partners on leave. The letter of apology said a former PwC Australia tax partner, Peter Collins, breached confidentiality as regards tax consultations with the Department of Treasury and the Board of Tax. “Contrary to the obligations he undertook with the government, as well as PwC policy and values, he shared information with certain PwC Australia personnel and a limited number of overseas PwC personnel.” PwC failed by not having adequate processes and governance, and because the culture of aggressive marketing in its tax business “allowed inappropriate behaviour” and did not hold leaders to account.

Where the scandal goes next depends on the findings of the inquiry by Ziggy Switkowski, who will report to PwC in September, and what the Australian Federal Police discovers. Treasury referred Mr Collins to the AFP last week following revelations he allegedly shared confidential commonwealth information about changes to tax laws with partners, staff and corporate clients who would be affected by them.

Within the business and accounting sectors, the revelation that PwC was garnering fees from the government to advise it on developing international tax-avoidance laws and then using that confidential information to help global clients avoid tax has trashed its reputation around the world among potential clients and staff. In coming months it has no alternative but to double down on strengthening and reinforcing ethical standards. And the government is looking at strengthening oversight of consultants and contractors, especially to ensure confidentiality in future. The Defence Department currently has 54 contracts worth more than $223m with PwC.

The scandal also has triggered unhelpful responses from the Greens and others for an expansion of the public service to take over work “that should be done by the public sector” rather than consultants, such as the big four. That would be neither efficient nor cost-effective. Professional service experts have a variety of skills and experience and would add substantially to the public sector wages bill if they joined the public service. Neither would their knowledge always be fully used, with consultants often engaged for short- or medium-term contracts for specific projects.