Local PwC boss in the dark over new Linklaters report

Kevin Burrowes hasn’t seen law firm Linklaters’ report into the local accounting and tax advisory firm’s tax scandal, which threatens to tear the business apart.

PwC Australia’s new boss has been kept in the dark by the advisory and accounting firm’s powerful global leadership about a probe revealing the global links to a tax scandal that threatens to tear the local operation apart.

Appearing before a Senate hearing on Thursday, PwC chief executive Kevin Burrowes told parliament he had not seen a copy of a report prepared by law firm Linklaters.

Mr Burrowes said no one in the Australian firm had received a copy of the findings of the Linklaters review, which “found no evidence that any PwC personnel outside of Australia used confidential information from PwC Australia for commercial gain”.

The report found most of the international partners who did receive information did not know it was confidential.

However, the Linklaters review found six individuals “should have raised questions as to whether the information was confidential”, noting some remained with the firm.

Mr Burrows told the committee he could not “tell you the names or the countries where those partners reside”.

However, members of the Finance and Public Administration Committee questioned Mr Burrowes denials, with chair Liberal Senator Richard Colbeck noting “PwC international (is) making your job for this committee very hard”.

“PwC international (is) depriving you of information when you come before us doesn’t help your case to rebuild trust in your organisation,” he said

“This was a process where Australian information that was used in breach of a confidentiality agreement … to design a process that would defraud Australians of tax.”

The Linklaters review was kicked off by PwC, at the behest of global chair Bob Moritz, after the firm’s international leadership grew concerned about the potential for the scandal to engulf its profitable business with some of the world’s biggest tech companies.

PwC CEO Kevin Burrowes fronts a Senate inquiry into consultancy services in Canberra. Picture: Martin Ollman/NCA NewsWire

The hearing comes weeks after Ziggy Switkowski’s review into the firm’s failures was released, blaming the scandal on PwC’s ‘aggressive growth’ plans as the reason for the tax scandal.

However, the inquiry took issue with the Switkowski review, with Senator Colbeck warning Mr Burrowes the report was inaccurate and attempted to cauterise the firm’s breaches and slate home the blame to the Australian operation.

Senator Colbeck said Mr Burrowes attempts to paint a legal distinction between PwC Australia and its global entities was irrelevant, warning “I’m not interested whether it's PwC Australia or PwC international. I don’t care”.

PwC repeatedly sought to portray the breaches being investigated by the parliament as limited to the sharing of the date on which new tax laws would take effect in Australia.

“To say that the breach of confidential information was used to structure, to create structures for our clients, was incorrect,” Mr Burrowes said.

Mr Burrowes said the exposure draft released by Treasury in May 2015 allowed multinational companies to look at how to restructure their operations in Australia to meet requirements, which he added changed little before it was enacted in December 2015.

“There was an unacceptable breach of confidential information that the inaction date was going to be January 1. That date had no consequence at all about the structuring advice that was provided,” he said.

Mr Burrowes added that PwC helped a small number of clients to structure their operations to meet the requirements and breached confidential information in relation to the date it would start.

“The breaches of confidential information was the provision of the date, that is all,” he said.

“That had no impact at all on the structuring of that work that we undertook. A structure that we subsequently had to unwind because it was unsatisfactory with the ATO.”

However, Mr Burrowes also told the Senate that the firm’s sharing of confidential information should never have taken place, warning PwC needed to re-earn the trust of its clients and the government.

This came after PwC’s head of international tax Peter Collins was banned after the Tax Practitioners Board found he shared confidential information with fellow members of the firm.

PwC used this information to create structures for its tech clients ahead of the introduction of the Multinational Anti Avoidance Laws in 2016.

Greens Senator Barbara Pocock took aim at Mr Burrowes’ characterisation of the confidentiality breaches, saying PwC Australia was “intent … on robbing the bank” and was only stopped by the Australian Taxation Office.

“That does not make them innocent,” Ms Pocock said.

Ms Pocock noted many members of PwC Australia’s leadership had taken on roles during the period in which the alleged breaches were known within the firm and had remained in their roles.

However, Mr Burrowes told the committee the firm considered they had not had a role in the confidentiality breaches, but some had faced financial penalties.

Mr Burrowes, who took over the local operations of PwC in June, was brought in by the firm after it was revealed the audit and consulting giant misused confidential government tax briefings in a bid to front run new tax laws set to be introduced in 2016.

“We cannot apologise strongly enough for breaching the trust place in us,” he said.

“We do not underestimate the scale of the task ahead, and we recognise that ultimately we’ll be judged not by our words, but by our deeds.”

Former PwC boss Luke Sayers fronts a Senate inquiry into consultancy services at Parliament House in Canberra. Picture: Martin Ollman/NCA NewsWire

Mr Burrowes Senate testimony comes following a string of senior departures at PwC in the wake of the tax scandal, which escalated in May.

The then-CEO of PwC Tom Seymour resigned in the wake of the publication of a trove of emails by the parliament revealing conversations within the firm detailing the sharing of confidential government information.

Mr Burrowes appearance before the inquiry comes as the first time PwC current and former bosses have fronted the parliament’s investigation into the breaches.

Former PwC CEO Luke Sayers also faced questioning on Thursday, telling the inquiry he was not aware of the confidentiality breaches that took place when he was running the firm.

Mr Sayers said an earlier “flawed investigation” meant he did not know about the breaches, pushing back on evidence from the ATO it had sought to raise its concerns with him.

“If the ATO had directly and formally advised me as the CEO of PwC Australia that Peter Collins had breached obligations of confidence, I would have sought details and ensured a full and thorough investigation,” he said.

“The sharing of government information clearly intended to be kept confidential, whether it is subject to a legal confidentiality agreement or not, is not something I would ever condone.”

Mr Sayers said that he was aware of the ATO’s formal notices sent to the firm in relation to legal professional privilege and promoter penalty concerns, noting there had been ongoing issues between the two for a “number of years”.

“Of course, I feel terrible. I’m sure every PwC person feels terrible,” he said.

“But the bottom line is that there were a number of bad actor tax partners, bad actor tax partners that behaviourally made the wrong choices. They made the wrong choices, and they shared confidential information.”

Originally published as Local PwC boss in the dark over new Linklaters report