‘Big four’ firm PwC is grappling with the fallout of the Australian tax leaks scandal over 144 pages of internal emails revealed by the Australian Senate. These message show confidential information flowing from partner to partner and eventually to clients.
PwC Australia announced on Monday, May 15, that an independent investigation into the firm’s culture and operations had begun. Australian businessman Ziggy Switkowski, chairman of banking group Suncorp, is conducting the review and a final report will be published in September 2023.
So far there has been a series of high-profile resignations and an independent inquiry has been launched, but the story is far from over. This scandal has implications for how tax advisers work with governments all over the world.
We know that the emails included details from high-level meetings with Australian policymakers. It is unclear how many people have received confidential information, or acted on it, at this point.
But the leaked messages go beyond Australia’s shores as far as Ireland and the US. It’s possible that the leaks will have consequences outside the country, especially if the names of all the email recipients – partners and clients – are revealed.
This is why PwC Global has flown some of its top executives to Sydney to help address the leaks. The last thing any firm wants is for such a scandal to become a global crisis – least of all a firm that has rebranded to put trust at the core of its public image.
Out the door
This month alone, PwC Australia has seen three resignations over claims the firm used information from high-level meetings to win new business.
Two partners, Pete Calleja and Sean Gregory, stepped down from the Australian firm’s executive board, reported the Australian Financial Review on May 10. Calleja was head of financial advisory services, while Gregory was responsible for risk management.
The biggest name to go was Tom Seymour, the CEO of PwC Australia, who resigned on May 8 after admitting that he received emails containing confidential government information.
Kristin Stubbins, head of assurance, has taken over as acting CEO at PwC Australia. Seymour is still a partner at PwC Australia but is set to retire in September when the report is published.
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 (TPB) in January.
Collins was a member of an advisory group involved in confidential policy discussions with the Australian Treasury. He was found to have broken confidentiality agreements on Treasury talks in 2013, 2016 and 2018.
Collins had shared details of upcoming policy changes as “rumour” after having meetings with Treasury officials. He received a two-year ban from serving as a tax agent for failing to act with integrity.
When Collins was banned, PwC acknowledged it had “failed the high standards we set for ourselves as a firm”. It should be noted that Collins left PwC Australia in October 2022.
Further afield
Nevertheless, the TPB ordered PwC to improve its standards and training on potential conflicts of interest, but this raises the question: is this a problem for the entire tax advice industry?
It would be reassuring for PwC if this story ended in Australia, but the chain of emails reached PwC professionals in Ireland, the UK and the US. What has begun with the Australian leaks may spread as regulators and tax authorities elsewhere seek to further scrutinise tax advisers and their clients.
It’s possible that the Australian government will take the leaks as a pretext for wrapping tax advisers in more red tape, but it won’t necessarily stop in one country. Advisers are already facing more regulatory pressure in many EU countries.
A lot of senior tax professionals outside PwC who have worked with governments will be searching their minds for any possible indiscretion either in speech or in writing. WhatsApp messages and emails are not to be written hastily.
We know what often begins as a tax scandal rarely ends with a few headlines. Many reforms have been implemented over the last decade in reaction to public outrage over tax avoidance and evasion. This could be another catalyst for stricter rules.
