PwC Australia has lost three leading figures, including its CEO and two executive board members, over the tax leaks scandal engulfing the ‘big four’ firm.
Two partners, Pete Calleja and Sean Gregory, stepped down from the Australian firm’s executive board, reported the Australian Financial Review on Wednesday, May 10. Calleja was head of financial advisory services, while Gregory was responsible for risk management at PwC Australia.
Tom Seymour, the CEO of PwC Australia, resigned on Monday, May 8, after admitting that he received emails containing confidential government information on tax avoidance law changes.
Seymour admitted receiving information from Peter-John Collins, former head of international tax at the firm, who was banned by Australia’s tax industry watchdog the Tax Practitioners Board in January.
Collins has been accused of sharing confidential information from meetings he had with Treasury officials about new tax avoidance legislation with a number of PwC colleagues. This information was used to win new business, according to emails released by the Australian Senate on Sunday, May 7.
However, the emails reached PwC professionals in Ireland, the UK and the US. After Seymour’s resignation, PwC said: “We have agreed with Tom that it is in the best interests of the firm and our stakeholders.”
Kristin Stubbins, head of assurance, will now serve as acting CEO at PwC Australia.
An independent inquiry is being conducted and the results will be released by the firm in the next few days.
‘Big pharma’ offshores 75% of profits: US Senate Democrat memo
US pharma companies offshore 75% of their profits to lower tax jurisdictions, according to a Democratic staff investigation.
The findings are the result of the tax probe launched by Senate Finance Committee Chairman Ron Wyden published in a memorandum yesterday, May 11.
Pharmaceutical companies had an average effective corporate tax rate of 11.6% in 2019/20, down from 19.6% in 2014/16, according to the memo.
The memo reveals that the pharmaceutical industry saw its average effective rate fall by more than 40% since the Tax Cuts and Jobs Act (TCJA) came into force in 2018.
So far, the US Senate investigation has named drugmakers Amgen, Bristol Myers Squibb and Merck as companies benefiting from tax breaks in the TCJA.
Norway delays plan for controversial onshore windfarm tax
The Norwegian government said yesterday, May 11, that its plans to impose a ground resource tax on windfarms will be delayed until 2024 over concerns that the levy could hold back the renewable energy industry.
Norwegian policymakers have proposed a 40% tax on onshore windfarms, which already face a headline corporate rate of 22%. The government has claimed it would benefit local and state revenue, but it faces opposition due to its potential negative impact on the industry.
The plan was predicted to have generated an estimated kr2.5 billion ($238.3 million) in tax revenue in 2023.
Åaslaug Haga, the head of industry lobby group Renewables Norway, said: “The proposal for a new ground resource tax for wind power must be amended so as not to hit utterly necessary investments into renewable energy.”
Ireland considers sovereign wealth fund on back of corporate tax revenue
The Irish government may establish a new sovereign wealth fund to accumulate up to €90 billion ($99 billion) on the back of corporate tax revenue raised this decade.
Finance Minister Michael McGrath submitted the proposal to the lower house of parliament, the Dáil Éireann, on Wednesday, May 10. McGrath’s proposal would allocate a minimum of €34 billion to the fund by 2030, with €90 billion as the maximum aim.
The Department of Finance estimates that the fund could raise between €111 billion and €142 billion by 2035 if the state invests €90 billion by 2030. Irish corporate tax raised more than €22.6 billion in 2022 – 48% higher than in 2021 – and is expected to reach €24 billion this year.
Ireland had a budget surplus of €8 billion last year, but policymakers have projected the government will have €65 billion by 2026.
European Parliament backs EU-wide financial transactions tax
The European Parliament voted 356-199 on Wednesday, May 10, in favour of a report backing an EU-wide financial transactions tax to finance its 2024 budget.
EU lawmakers Valérie Hayer and José Manuel Fernandes co-authored the Renew Europe report, published on May 10. It advocates for an EU-wide FTT, as well as a fair carbon border mechanism, excise duties on share buybacks and a special tax on cryptocurrencies.
The liberal Renew Europe group also supports a digital tax across the EU should the OECD fail to secure international tax reform.
These sources of revenue would help EU member states repay the debts amassed during the COVID-19 pandemic, according to the report, as well as make new funds available for supporting Ukraine in its war with Russia.
Russia forced to raise oil taxes in response to G7 price cap
The Russian government has been forced to increase taxes on oil as a result of Western pressure over its war with Ukraine, reported the Financial Times on Monday, May 8.
Russia is taxing oil sales based on a discount to Brent crude prices rather than the Urals benchmark, according to G7 officials. This is despite the fact that the price of Urals crude oil is lower than Brent.
President Vladimir Putin changed the benchmarks for Russian oil taxes in April to raise ₽600 billion ($8 billion) in revenue to plug the gap left by exports lost to Western sanctions. His government began to set oil taxes based on the Brent crude international benchmark price minus a fixed discount.
Russian oil and gas tax revenue dropped by 45% in the first quarter of 2023, according to the FT. This decline includes an 85% fall in tax revenue from refined oil products since March 2022.
The G7 capped the price of crude oil imports at $60 per barrel in December 2022 to stop Russian oil sales to Western economies. Putin has threatened to cut oil output in response.
Spanish windfall tax wipes out profits of banks and energy groups
Spain’s €3 billion ($3.2 billion) windfall tax on big banks and energy groups is disproportionately hitting the profits of domestic businesses compared to multinational groups, reported the FT on Friday, May 5.
As the tax applies to revenue, it is particularly costly for companies with small profit margins. The windfall tax only targets operations in Spain itself.
Spanish oil company Cepsa reported that it had been charged €323 million as part of the windfall tax in 2023. This cancelled out its profits and left the company with a net loss of €297 million for the first quarter.
CiaxaBank, Spain’s biggest lender by deposits, was charged €373 million, 44% of its net profit for the first quarter of 2023.
The fact that the tax pushed Cepsa into a net loss shows “its poor design and disproportionate impact”, said Maarten Wetsellar, the oil company’s CEO.
Next week in ITR
ITR will be following the runup to the G7 meeting from May 19 to 21, especially after the OECD published its 2023 progress report ahead of the summit.
We will also be covering the fallout of the tax leaks scandal for PwC Australia and what it means for the tax advice industry.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.
