Senate committee report accuses PwC of trying to cover up tax leaks scandal
A senate committee has accused consultancy firm PwC of attempting to cover up the tax leaks scandal and criticised extensive leadership failures by the firm’s former executives.
A second interim report by the Senate standing committee on finance and public administration, titled “the cover up worsens the crime”, has accused the firm of withholding information about the conduct of its international partners.
The report, tabled in the Senate, focuses on the scandal unleashed after a former partner was banned for sharing confidential Treasury information about multinational tax laws with colleagues, who then sold the information to US companies as part of an initiative dubbed “Project North America”.
Since then, the Australian firm has been forced to divest its entire government consulting business for just $1, been referred to the federal police and the national anti-corruption commission for investigation, and retrenched hundreds of staff.
The interim report follows an earlier report by the committee, in June last year, which accused PwC Australia of a “calculated” breach of trust by using confidential information to help its clients avoid tax. It considers recent actions taken by the firm and its appearance before the inquiry.
The bipartisan committee has acknowledged PwC Australia has overhauled its internal governance structures in recent months, but described the changes as largely “symbolic” and accused the firm of making “no genuine effort to fully investigate and address the issues”.
“Rather, their ongoing approach appears to be to hide behind legal professional privilege and hope it will go away,” the report said.
A PwC spokesperson said the firm had taken “considerable steps to transform our firm and rebuild trust” including the appointment of an independent board chair. It was the first big four consulting firm to do so.
“We would highlight again that meaningful change takes time and that we will continue to cooperate with the Senate and regulators in an effort to enact transformative, structural change to our firm and industry,” the spokesperson said.
The report also criticises PwC International for refusing to comply with a request from the Australian parliament to share a copy of an investigation used to contain the tax leaks scandal to Australia. The firm has claimed legal professional privilege over the report, which cleared international partners of wrongdoing, but insists all relevant information contained in it has been referred to authorities.
“The failure of PwC to be completely open and honest as per the committee’s recommendations in its first report is reflective of PwC’s failure to genuinely change,” the report said. “The committee does not see how PwC can recover their reputation while it continues to cover up because the two are incompatible. Indeed, the cover up worsens the crime.”
Labor senator, Deborah O’Neill, a member of the senate inquiry, said she was disappointed that “much is still unknown about the actual misconduct by PwC and its partners amid the efforts by the firm’s domestic and global leadership to minimise their reputational damage”.
“The report highlights both the immense failures of leadership, professionalism and ethics which enabled the tax leaks scandal to occur in the first place, and the gross failures of professional accountability which saw it go unacknowledged and unpunished for so long,” O’Neill said in a statement.
“The reputational and financial damage that the firm has deservedly suffered as a consequence of their misconduct is not easily erased despite the firm’s attempts to cauterise its Australian operations from its global network.”
The report found PwC Australia’s leadership “consistently failed to take responsibility for the problems within the organisation that led to this situation occurring”. The committee acknowledged PwC Australia leaders appeared for questioning by the committee, but said it was “disappointed at the lack of substantive answers”.
Greens senator Barbara Pocock, another member of the inquiry, said the firm’s refusal to share the report “remains a stain on the firm’s reputation not only here in Australia, but globally”.
“What we are looking at here is institutional failure that requires root and branch reform. Australian taxpayers deserve better from their government and I hope that when our final report comes out that the recommendations will be acted upon for the benefit of all Australians.”
Earlier this month, PwC Australia rejected claims it was not cooperating with parliamentary inquiries and multiple investigations into the conduct of former partners.
“While we note the desire for the Senate to have access to legal advice received by others in the PwC network, we are mindful of the basic legal right of legal professional privilege that operates in many jurisdictions including in Australia,” a PwC spokesperson said.