Albanese government to increase maximum fines on firms engaged in tax exploitation scheme by 100 times

In the wake of the PwC scandal, Labor has increased the maximum fines for firms promoting tax exploitation schemes by more than 100 times.

Labor’s crackdown follows revelations this year that senior PwC partners shared confidential information regarding tax law changes with major multinational companies to help them avoid paying more tax. Picture: Reuters

Big consultancy firms face fines of up to $780m for exploiting tax loopholes, and regulators’ powers will be bolstered under a government shake-up in response to the PwC scandal.

The broader use of consulting firms by governments will also face sweeping changes.

The use of confidential information is to be examined and there will be a major increase in funding for regulators.

PwC Australia said it would need to “carefully digest” the changes to increase tax promoter penalties by 100 times to a maximum $780m, from $7.8m, in a bid to punish aggressive minimisation marketing by consulting firms.

In a move described as “the biggest crackdown on tax adviser misconduct in Australian history”, Labor will also increase the time limit for the Australian Taxation Office to take firms to court over suspected misconduct from four years to six after an incident.

Jim Chalmers said the government was steeply increasing tax promoter penalties, which have been used only six times since they were introduced, as part of a suite of new reviews and legislative changes to be introduced.

The consulting sector is facing multiple reviews and investigations into its model and interactions with governments after it was revealed PwC had shared confidential government tax briefings widely within the firm to shape tax strategies for clients.

“By increasing penalties, giving regulators stronger teeth to investigate and prosecute perpetrators and boosting transparency, collaboration and co-ordination within government, we are acting to restore public confidence and help prevent this from happening again,” the Treasurer said.

The Tax Practitioners Board will be empowered to run length­ier, more complex investigations into potential breaches and dispense harsher punishments.

Members of the consulting sector have welcomed the changes, aimed squarely at breaches committed by PwC but set to cast a shadow across the whole consulting industry’s engagement with government.

One of the big four audit and consulting giants, Deloitte Australia, on Sunday said the crackdown on tax adviser misconduct was welcome, while pledging to “work constructively with gov­ernment and regulators to strengthen trust in the quality and integrity of professional tax advice”.

KPMG said the package of reviews and further powers for regulators was “a significant, sensible and constructive step forward in restoring trust in our profession”.

In an investigation by ABC Four Corners, KPMG has been accused by of inflating invoices.

PwC said it would review “these announcements and will digest them carefully”. “We look forward to working with the government and regulatory bodies to enhance the overall regulation of our industry,” a spokesman said.

“We will continue to take the appropriate action to restore the trust of our stakeholders.”

Senator Barbara Pocock. Picture: NCA NewsWire/Martin Ollman

Treasurer Jim Chalmers. Picture: NCA NewsWire/Martin Ollman

Greens senator Barbara Pocock said the government’s measures were a “step in the right direction” but noted PwC was yet to suffer “any direct penalty for their blatant misuse of confidential government information” calling on the firm to have its tax agent status removed.

PwC has shed its government consulting business, in a $1 deal with private equity player Allegro Funds, after parliament revealed the firm had plotted sharing confidential government briefings.

Treasury has been appointed to run a whole of government response to the scandal, with its review set to examine Australia’s tax, superannuation and capital markets systems.

This ongoing review will report into government over two years and will examine strengthening the powers of the TPB and extending whistleblower protections to those reporting tax agent misconduct to the regulator.

“The PwC scandal exposed severe shortcomings in our regulatory frameworks that were largely ignored by the Coalition; today we’re taking significant steps to clean up the mess,” Dr Chalmers said, in a joint statement with other senior ministers including Finance Minister Katy Gallagher.