The tax office brawl that almost ended investigation of PwC scandal

The Senate committee that uncovered the PwC tax scandal is due to release its final report this Wednesday, but it will not end the fallout that has already torn the consulting firm in two and sent shockwaves throughout the entire industry.

The tax office now faces fresh scrutiny over allegations it actively attempted to derail the investigation that led to former PwC partner Peter Collins being banned in 2022 for sharing sensitive government tax plans with other partners and potential clients.

The PwC tax scandal has put the behaviour of the tax office under the microscope. Credit: Aresna Villanueva

The scale of the scandal was revealed in May last year when the Senate committee released a cache of emails revealing the brazen attempt to use confidential government tax plans to cultivate fresh business from notorious corporate tax avoiders like Google and Facebook. This was triggered by queries from Senator Deborah O’Neill.

Fresh concerns were raised last month when government agencies, including the Australian Tax Office (ATO), replied to questions on notice from Senator Barbara Pocock.

It confirmed there was a barrage of actions targeting the Tax Practitioners Board (TPB) and its chief executive, Michael O’Neill, which discovered the damning evidence that was made public via the Senate committee.

The actions included bullying allegations by ATO staff against O’Neill and other TPB executives, an attempt to rewrite the terms of O’Neill’s employment to ensure he could not return to the ATO as an employee if he left the TPB, and the ATO’s fraud prevention unit was directed to investigate the TPB boss over alleged leaks to the Australian Financial Review.

Liberal senator Richard Colbeck, Labor senator Deborah O’Neill and Greens senator Barbara Pocock are on the senate committee which uncovered the scandal.Credit: Australian Financial Review

None of the issues were substantiated, and the attempt to change his employment contract failed. The ATO’s own senior staff also hosed down the bullying allegations, but the role of the tax office in these events will get closer scrutiny when the ATO and the TPB appear before senate estimates later this month.

“There is now clear evidence of a succession of five separate processes enacted against the TPB CEO, Michael O’Neill, that leaned on the effectiveness of the TPB’s investigation,” Pocock said. “Our regulators need employment security, proper access to data and support for their investigations.”

The ATO has denied any untoward behaviour.

“The ATO does not accept the suggestion that our actions were taken to pressure the TPB and/or the TPB CEO in relation to the Collins matter. We referred Mr Collins to the TPB after we identified a confidentiality breach,” a spokesperson said.

“Evidence shows we detected, investigated, and referred Collins to the TPB, and have continued to support further investigations into the matter.”

While the ATO referred the matter to the TPB, its response to the senate questions on notice did not hide the fury at the highest levels of the tax office when the TPB widened the Collins investigation to include PwC in 2021. It did this after it became clear that the confidential government tax plans had been shared with other partners.

The main point of contention was how the TPB accessed tax office information to further its investigation.

A later review of the troubled ATO/TPB relationship said: “Access to ATO data is the universally recognised key ‘pinch point’ between the two organisations.”

Former Tax Commissioner Chris Jordan accused the Tax Practitioners Board of active deception of the ATO in relation to the PwC investigation. Credit: Alex Ellinghausen

This included the tax office settlements with global companies that clawed back about $180 million in annual tax payments, following the implementation of the tax avoidance laws, which had been the subject of the confidential information leak.

Tensions erupted at a TPB board meeting September 1, 2021 where tax commissioner Chris Jordan and second commissioner Jeremy Hirschhorn confronted the board about the conduct of the investigation in a fiery meeting.

“We did not tell them to back off … in fact, we were very keen that they did a review on Mr Collins and PwC,” the ATO’s second commissioner, Jeremy Hirschhorn, told a Senate committee last year.

But a letter from ATO commissioner Chris Jordan dated just weeks after the meeting suggests the TPB’s board was left in no doubt about the tax office’s unhappiness with the investigation; specifically, O’Neill’s investigators sending notices to 26 companies that had settled with the tax office.

Jordan pointed out that just months earlier, the tax office explicitly declined to provide taxpayer related information to the TPB investigators, citing confidentiality and a lack of connection to the matter referred to by the TPB.

“Independence of the TPB does not imply a disregard of the position of the ATO and indeed, what amounts to active deception of the ATO,” Jordan said.

“The notices represent a serious overreach by the TPB and I ask that you instigate a review of the TPB’s entire conduct of this investigation as a matter of priority.”

It triggered an internal review by TPB board members into the complaint – as part of this process, the bullying and harassment allegations by ATO staff against O’Neill and the TPB were raised.

This is despite an email from the ATO’s own legal team in July 2021 that advised on the complaint, stating that “a quick read gives the impression that the authors have been invited to give negative feedback”.

The allegations were the subject of a two-hour TPB board meeting in December 2021, where chairman Klug told O’Neill “this may not end well for you.”

A year later, the TPB banned Collins for two years over his conduct with the findings made public in January last year.

The TPB had succeeded with its investigation where earlier referrals to the Australian Federal Police (AFP) had failed, due to the ATO citing secrecy provisions which prevented it from providing further evidence.

The matter was referred to the AFP again in May last year, after the evidence gathered by the TPB’s investigation became public, and a criminal investigation was commenced into Collins.

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