PwC Australia has confirmed that it reached a confidential settlement with the Australian Taxation Office as the tax leaks scandal was engulfing the firm, reported The Guardian on Wednesday, July 26.
The firm has not divulged the details of the settlement. However, the agreement was reached in March 2023 just before the full extent of the confidentiality breaches at PwC were disclosed.
Until June, PwC Australia claimed that the tax leaks were contained to one former partner, Peter-John Collins, who is under criminal investigation by the Australian Federal Police. Finally on June 5, the firm named 67 members of staff who appeared in emails linked to the leaks.
Treasurer Jim Chalmers has said he was not aware of the settlement.
“The specifics of that arrangement wasn’t part of our consideration – obviously it is now – and we will talk to the ATO about it,” he told the Australian Broadcasting Corporation.
The PwC-ATO settlement was not revealed in recent parliamentary hearings into the tax leaks scandal. Kristin Stubbins, acting CEO of PwC Australia, did not reveal the settlement at the New South Wales hearing in June, but she was not directly asked about any arrangements.
Likewise, ATO officials had acknowledged the importance of confidential settlements but did not specify the PwC agreement. The ATO has not commented publicly on the deal.
Biden will not pardon son for tax charges following not guilty plea
The White House has ruled out any chance of President Joe Biden pardoning his son Hunter Biden, who has been charged with evading $100,000 in tax and who unexpectedly chose to plead not guilty on Wednesday, July 26, in Delaware.
Hunter Biden, who is also fighting gun-related charges, had agreed a plea deal with prosecutors in which he would plead guilty and receive two years’ probation. In a surprising twist, he rejected the deal.
In a briefing, White House Press Secretary Karine Jean-Pierre was asked: “From a presidential perspective, is there any possibility that the president would end up pardoning his son?”
“No,” replied Jean-Pierre.
Pressed, she said: “I just said no. I answered.”
Presidential pardons have long been controversial, with Donald Trump and Bill Clinton often coming under criticism for pardoning donors and supporters.
France drags out end of CVAE over deficit concerns
The French government is dragging out the plan to abolish contributions on added value (CVAE) pledged by President Emmanuel Macron during his successful 2022 re-election bid, reported Bloomberg.
Finance Minister Bruno Le Maire said on Tuesday, July 25, that the abolition of CVAE would not take place in 2024 but by the end of Macron’s second term in 2027. This tax cut would save French businesses an estimated €8 billion ($8.8 billion).
France has seen its credit rating downgraded over its growing budget deficit. As a result, the government is slowing down its plans for fiscal reform.
“Heavy debt is unbearable and a danger for the French nation,” said Le Maire. “Everyone knows we have to start cutting debt when things are going better.”
CVAE is levied on business turnover, employees and property rather than profit. This value-added levy applies to businesses with revenues of more than €500,000 and rises from 0.5% to 1.5% at €50 million in turnover.
TJN claims tax havens will cost governments $4.7tn
Governments around the world are going to lose an estimated $4.7 trillion over the next decade unless a UN tax convention is adopted, according to the Tax Justice Network.
The State of Tax Justice 2023 report, published on Tuesday, July 25, claimed countries are losing $472 billion in tax revenue every year to abusive tax practices. It made the case for the UN to take on a greater role in tax policy to address this global problem.
Of the headline figure, over $300 billion is lost to cross-border tax avoidance, according to TJN’s estimates. More than $170 billion is lost through wealthy individuals offshoring income and assets to tax havens, the report found.
These losses will amount to almost $5 trillion in tax revenue over10 years unless the world acts to reduce tax avoidance, the TJN report claimed. However, these figures have not gone unchallenged.
Dan Neidle, director of Tax Policy Associates in the UK, has disputed the calculations in the TJN report. He argued that the report’s estimates are wrong due to a flawed methodology, arguing the true figures are likely far lower.
Top accounting firms allowed audit quality to slip, says US watchdog
There has been a sizeable increase in the number of faulty audits carried out by the ‘big four’ firms as well as mid-tier global accounting firms, a report found on Monday, July 24.
The Public Company Accounting Oversight Board (PCAOB) said that when its inspectors observed the work of global network firms — the big four of Deloitte, PwC, KPMG and EY, plus Grant Thornton and BDO – they found that 30% of audits carried out in the US in 2022 were deficient.
This made headlines because it’s 20 years since Arthur Andersen, one of the ‘big five’ at the time, collapsed over accounting failures amid the Enron scandal.
Audit quality outside of the US saw a larger decline as the proportion of flawed audits undertaken by non-US businesses rose to 31% in 2022, up from 17% in 2021. The number of low-quality audits in the US jumped from 21% to 30% over the same timeline.
PCAOB’s report also revealed even higher rates of insufficient audits undertaken by smaller firms, with over half of US audits failing to meet required standards.
“Audit reports are critical to keeping investors protected,” said PCAOB chair Erica Williams, “and audit quality is not where it should be... [The] deficiency rate is completely unacceptable.”
UK deficit lower than expected, but tax cuts still unlikely
The UK government had a lower budget deficit than expected last month partly due to cutting back on emergency public spending, according to the Office for National Statistics on Friday, July 21.
The deficit was £18.5 billion ($23.8 billion) in June 2023. This was lower than the ONS forecast deficit of £22 billion for June. Meanwhile, the interest payable on government debt was £12.5 billion – £7.5 billion less than it was in June 2022.
The ONS pointed out that this is still the third highest amount of borrowing in June on record since 1993. The UK government is unlikely to pursue tax cuts in its next budget, despite this fall in the deficit, because it’s partly the result of rising tax revenue from income tax and VAT.
Nevertheless, the government continues to face pressure from within the ruling Conservative Party on tax reform. Many Conservative members of Parliament want to cut taxes before the next general election, which is due to be held by January 2025.
Next week in ITR
ITR will be keeping a close eye on developments at the OECD on pillar one. We will also be following up on any updates from the Latin American tax summit in Cartagena, Colombia.
In other news, Euan Healy has an exclusive interview with Deborah O’Neill, Labor senator for New South Wales, on the Australian tax leaks scandal.
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.
