PwC: A calculated breach of trust
We take our obligations as tax agents very seriously. I have the utmost faith in the ethical standards of the people we employ.
I certainly would be shocked and hugely disappointed if anyone in our firm is breaching laws.
– Mr Tom Seymour, then Managing Partner, Tax and Legal, and now former CEO of PwC Australia, to a Senate Committee in 2015.
Overview
1.1The scale of significance and substantial public interest in the matter of PricewaterhouseCoopers' (now PwC's) conduct in relation to Australia's anti-avoidance tax laws, dating back to 2013, motivated the Finance and Public Administration References Committee (the committee, or FPA References committee) to release this report as part of the inquiry into the management and assurance of integrity by consulting services, which continues and is due to report 30 November 2023. Subsequent reports will deal with the wider range of matters arising from the inquiry's activities which extend to the larger consulting industry.
1.2In January 2023, media reports brought to light that accounting, auditing, and consulting firm PwC and one of its partners, MrPeter Collins, had been investigated and received sanctions from the Tax Practitioners Board (TPB).
1.3From 2013 to 2016, Mr Collins received confidential information from Treasury consultations and through his engagement with the Board of Taxation in relation to Australia's forthcoming anti-avoidance tax laws.
1.4Despite having signed multiple confidentiality agreements, Mr Collins intentionally shared this confidential information with PwC partners and others both in Australia and overseas.
1.5In sharing this confidential information, Mr Collins sought to assist existing and potential new clients of PwC to avoid the anti-avoidance tax laws to be introduced in 2016—putting at risk $180 million per year of tax to be paid in Australia. Further, 'Project North America' generated new income of at least $2.5 million for the first tranche of PwC's services in assisting clients to sidestep the new laws.
1.6These events helped inform the referral of the inquiry into the management and assurance of integrity by consulting services to the FPA References committee.
1.7This report examines the key events of the PwC matter and their intersections with the committee's inquiry. It also sets out the committee's views on PwC's approach to this serious and deliberate breach of confidence.
Consultations, Confidentiality and Corporate tax avoidance
1.8On 11 December 2013, PwC partner Mr Collins signed a confidentiality agreement with Treasury, in order to participate in confidential consultations as a member of the Base Erosion and Profit Shifting (BEPS) Tax Advisory Group; and to consult on legislation and policy positions intended to give effect to the Organisation for Economic Cooperation and Development (OECD) BEPS provisions, including the Multinational Anti-Avoidance Law (MAAL), the Diverted Profits Tax (DPT), and Hybrid mismatch rules.
1.9Mr Collins attended multiple confidential briefings over the period of development of Australia's anti avoidance tax laws.
1.10On Budget night in 2015, details were released of the new Multinational Anti-Avoidance Law, designed to prevent multinationals using complex and artificial structures to escape paying Australian tax.
1.11Also in 2015, the Senate Economics References Committee was inquiring into corporate tax avoidance and aggressive minimisation. At this time, Mr Collins was National Leader, International Tax Services and Mr Tom Seymour was Managing Partner, Tax and Legal at PwC (Mr Seymour became Chief Executive Officer (CEO) of PwC Australia in 2020). Mr Luke Sayers was CEO of PwC Australia between 2012 and 2020.
1.12In PwC's submission to the corporate tax avoidance inquiry, PwC stated:
PwC Australia will continue to engage in the reform process to assist in the improvement of tax law. We regularly engage policy and law makers to support this process. That said, the role of professional services firms like PwC is to provide tax advice to companies in accordance with current laws. As we give advice to our clients, we do so with ethical guidelines applicable to our profession and we encourage them to think through the reputational impacts of their planning actions. We are proud of PwC Australia's role in providing tax advice to companies to efficiently manage their tax obligations in accordance with the current laws and in accordance with our Global Tax Code of Conduct.
1.13The Global Tax Code of Conduct requires PwC to:
act in accordance with local laws and regulatory requirements;
give proper disclosure as required by those laws or requirements;
strive to apply the highest possible technical standards; and
comply with professional standards of integrity and objectivity.
1.14In a public hearing for the inquiry on 10 April 2015, Mr Collins and Mr Seymour appeared before the committee. Mr Collins acknowledged that:
We work with our clients every day with their operations and give them tax advice around their operations, and that would involve pointing out planning opportunities.
1.15Further, Mr Seymour told the committee:
We absolutely operate in the best interests of our clients when we provide advice to our clients on an individual matter.
1.16On 1 January 2016, the MAAL commenced.
1.17As early as April 2016, the Australian Taxation Office (ATO) became aware of companies working to avoid the newly introduced MAAL. In response, the ATO sent notices to the big four accounting and audit firms, including PwC, in relation to alerts about schemes for tax avoidance towards the end of 2016.
1.18It has since become public that PwC used thousands of claims of legal professional privilege to conceal its internal documents from the ATO. It appears PwC did this to prevent the ATO obtaining documents and emails that would have revealed the plans that certain PwC partners had for monetising the confidential information that Mr Collins had acquired from his role as an adviser to government. At a recent hearing of the FPA References Committee, Mr Jeremy Hirschhorn, Second Commissioner, Client Engagement Group at the ATO, confirmed that, in response to the notice the ATO had sent to PwC, 'we were frustrated through large claims for legal professional privilege on behalf of clients'.
1.19Mr Hirschhorn explained that eventually the ATO 'got some emails which suggested that there had been a breach of confidentiality in relation to a Treasury consultation process'.
1.20Mr Collins signed further confidentiality agreements with Treasury on 15April2016 and 19 February 2018.
1.21At Senate Estimates in May 2023, Mr Hirschhorn noted that:
In October 2017 we asked Treasury for a standard confidentiality agreement, which we obtained. Later on, in 2018 we asked Treasury for a specific confidentiality agreement, the agreement with Peter Collins. We expressed general concerns to Treasury, but due to secrecy we could not share specific information or share specific concerns.
Investigations by the ATO and TPB
1.22Throughout 2017, 2018 and 2019, the ATO received thousands of pages of information from firms containing details of their client lists and target lists in relation to the avoidance schemes. In response to a direct request, the ATO also received internal email exchanges between PwC staff which could not be subject to legal professional privilege. The ATO is still currently seeking to acquire some documents.
1.23At the end of 2017, upon examination of the documentation provided in response to its notices, the ATO 'found hints that there had been a breach of confidentiality by Mr Collins'.
1.24According to the ATO, in 2018, PwC acknowledged that at least one of the tax avoidance structures related to transactions that PwC was promoting to their clients, and PwC conceded this was not in line with community expectations.
1.25In March 2018, the ATO sought and received advice from its General Counsel about who it could share the information with that it had gathered relating to the misuse of confidential information by Mr Collins and PwC. The options included the Australian Federal Police (AFP), the Commonwealth Director of Public Prosecutions, and the TPB.
1.26Following this advice, the ATO shared 'selected documents' with the AFP in March 2018. After approximately 12 months, the AFP and ATO concluded there was not sufficient evidence to pursue a formal investigation.
1.27On 2 July 2020, the ATO referred the matter of Mr Collins' misuse of confidential information to the TPB, who commenced their investigation on 11January 2021.
1.28On 8 March 2021, the TPB commenced a separate investigation into PwC.
1.29On 23 December 2022, the TPB updated its Public Register with its findings and sanctions in relation to Peter Collins and PwC. On 19 January 2023, the Public Register was further updated with reasons for the decisions.
1.30The TPB found that PwC had breached subsection 30-10(5) of the Code of Professional Conduct in that PwC had failed to have in place adequate arrangements to manage conflicts of interest that arose in relation to its activities as a registered tax agent.
1.31Because of this finding, PwC is required to take certain steps in relation to its management of conflicts of interest. These steps include:
ensuring the education of its staff about conflicts of interest;
ensuring the coordination of registration of conflicts;
introducing a better governance and reporting system within the firm; and
twice a year PwC will be required to report to the TPB on the progress of the changes they are making.
1.32With respect to Mr Collins, the TPB noted that, while a partner and a nominated supervising registered tax agent for PwC:
Mr Collins received confidential information from Treasury consultations as a member of the BEPS Tax Advisory Group, and on legislation and policy positions intended to give effect to the OECD BEPS provisions, including the MAAL, the DPT, and Hybrid mismatch rules;
the confidential information was subject to Commonwealth Confidentiality Acknowledgements signed by Mr Collins on 11 December 2013, 15 April 2016, and 19 February 2018;
Mr Collins received confidential information and documentation during the course of his participation in consultations facilitated by the Board of Taxation on potential legislation and policy positions intended to give effect to the OECD BEPS and anti-hybrids provisions;
Without the prior approval of the Board of Taxation, Mr Collins shared confidential information and documentation, which he obtained from these Board of Taxation consultations, within PwC with other PwC personnel;
Mr Collins was engaged by Treasury in confidential consultations on proposed Australian tax legislation and policy positions intended to give effect to the OECD BEPS provisions, including the MAAL, DPT and Hybrid mismatch rules;
As a result of these consultations, Mr Collins was privy to confidential information including how the proposed legislation and policy might impact the tax position of PwC’s existing clients as well as potential clients. This put MrCollins in a position of conflict due to the potential market advantage of having knowledge of this confidential information and the fact that it could be utilised to advance the position of PwC’s existing taxation clients as well as marketing its services to attract new clients;
Additionally, internal communications within PwC indicated that MrCollins was aware that the confidential knowledge he gained from the consultations with Treasury would be leveraged to market PwC to a new client base;
Despite the existence of signed Confidentiality Acknowledgements by MrCollins specifying that the information he acquired could not be shared without prior approval from Treasury and the communications from Treasury being clear that the information was being disclosed on a confidential basis, some of the confidential information was disclosed by MrCollins with other PwC personnel who, in turn, disclosed to clients or potential clients of PwC.
1.33As a result, the TPB found that Mr Collins had breached subsections 30-10(1) and 30-10(5) of the Code of Professional Conduct (the Code) in the Tax Agent Services Act 2009 (TASA).
1.34The TPB terminated Mr Collins' registration as a tax agent and prohibited him from applying for registration for a period of two years, until the end of 2024.
1.35In recent evidence to the FPA References committee, Mr Peter de Cure, Chair of the TPB, confirmed that, while a formal investigation is yet to be opened, the TPB's inquiries into individuals and PwC are ongoing:
We have sought specific information from PricewaterhouseCoopers in relation to making sure that there are no breaches of the TASA by registered agents that have not yet been dealt with. In substance, we're continuing to investigate issues around this matter to make sure that we've completed a full process.
1.36Mr de Cure also noted that the Tax Agent Services Act 2009 includes a requirement to report when there is a breach, or a suspected breach, under subdivision 30. He advised that the TPB had not received any breach reporting under subdivision 30 from PwC and commented that, 'given what we know now, I would think that they [PwC] should have reported to us under that subdivision'.
1.37The question of who inside PwC was involved in the misuse of confidential information remains unanswered.
Inquiries into the PwC matter by the Senate and the PwC response
1.38Following the TPB publication of the sanctions for PwC and Mr Collins, the Senate pursued the matter during the 2022–23 Supplementary Budget Estimates hearings in February 2023 and followed up with numerous written questions on notice.
1.39On 9 March 2023, on the motion of Senator Barbara Pocock, the Senate agreed to refer an inquiry into the management and assurance of integrity by consulting services to the FPA References Committee.
1.40On 2 May 2023, as part of the Senate Estimates process, the Senate Economics Legislation Committee published an answer to a question on notice asked by Senator Deborah O’Neill. The answer from the TPB included 144 pages of heavily redacted PwC emails.
1.41The internal PwC emails (with names and certain other information redacted) nonetheless revealed that several partners and potentially other employees within PwC were aware of, and involved in, the deliberate misuse of the confidential information to aggressively market PwC to a new client base.
1.42Until the publication of the internal PwC emails by the Senate Economics Legislation Committee on 2 May 2023, PwC had said very little in relation to MrCollins, the conflicts of interest, the breaches of confidentiality, and the plan to build a new client base by marketing and monetising inside knowledge of how to circumvent Australia's new corporate tax regime.
1.43Indeed, on 10 April 2015, Mr Seymour, then Managing Partner, Tax and Legal, and now former CEO of PwC Australia, told the Senate Economics References Committee that PwC took their 'obligations as tax agents very seriously' and that he had 'the utmost faith in the ethical standards of the people we employ'. MrSeymour, appearing with Mr Collins, further stated that he 'certainly would be shocked and hugely disappointed if anyone in our firm is breaching laws'. The breaches discussed above were underway at the time of the Senate Economics References Committee inquiry.
1.44On 8 March 2023, speaking at the Australian Financial Review (AFR) Business Summit, Mr Seymour referred to the scandal as a 'perception issue'.
1.45On 8 May 2023, Mr Seymour stood down from his position as CEO of PwC Australia and confirmed that he had received emails from Mr Collins related to the confidential Treasury information. MrSeymour will remain a PwC partner until September 2023.
1.46On 15 May 2023, PwC announced a review of PwC Australia's culture, governance, and accountability to be led by Dr Ziggy Switkowski AO. PwC had initially advised that it would release a summary of this review. However, PwC has since said it will publish the report and recommendations in full in September 2023.
1.47Meanwhile, on 22 May 2023, the Senate FPA Legislation Committee began its week-long 2023–24 Budget Estimates hearings. The engagement of consulting services by government departments and agencies was a focus of that committee throughout the hearings, as was the PwC matter.
1.48Then on 24 May 2023, during the budget estimates hearings, the Secretary to the Treasury, Dr Steven Kennedy PSM, released a statement referring the PwC matter to the AFP for a possible criminal investigation. The statement read:
PwC Australia's former head of international tax, Mr Peter Collins, improperly used confidential Commonwealth information.
The emails that the Tax Practitioners Board tabled in Parliament on 2May2023 highlighted the significant extent of the unauthorised disclosure of confidential Commonwealth information and the wide range of individuals within PwC who were directly and indirectly privy to the confidential information.
In light of these recent revelations and the seriousness of this misconduct, the Treasury has referred the matter to the Australian Federal Police to consider commencement of a criminal investigation.
1.49On 25 May 2023, the Sydney Morning Heraldreported that the AFP had commenced an investigation 'and no further comment will be made at this time'.
1.50On Friday 26 May 2023, during the FPA Legislation Committee estimates hearing, Senator Barbara Pocock sought leave to table a list of PwC partners 'involved in the misuse of confidential information'.
1.51Given that Senate Standing Order 26(2) provides that a legislation committee conducting Senate estimates hear evidence in public session, a committee decision to receive a document during proceedings on estimates necessitates the publication of that document.
1.52To properly consider the possible consequences of accepting and tabling the list, the FPA Legislation Committee sought advice from the Clerk of the Senate, MrRichard Pye. The Clerk's advice, received on 29 May 2023, is published on the FPA Legislation Committee's website.
1.53The Clerk's advice noted that, while it is a matter for the committee to determine whether to receive and publish the list, its decision should be informed by committee members' assessment of the competing public interests involved.
1.54These public interests include: the current AFP investigation, the possible creation of a pool of evidence unable to be examined by the courts, and the adverse evidence provisions that may apply if individuals are publicly named as 'involved' in the matter by the committee.
1.55On the question of a possible impact on the AFP investigation, the Clerk noted that, at this stage, 'the committee could only speculate as to whether the provision of a list of names of those allegedly involved would in fact interfere with the investigation'.
1.56The Clerk also warned the committee of the danger of defendants deliberately placing material before a parliamentary committee in the hope of aborting or disrupting the court proceedings.
1.57In relation to the possible creation of a pool of evidence, the Clerk advised that committee evidence cannot be used for most forensic purposes before the courts. However, the Clerk noted that this concern principally arises when primary documents are put before the parliament which do not exist in any other form. The Clerk also considered that 'it is difficult to see how that would apply in the case of a list of names that is presumably derived from some external source'.
1.58In considering whether to receive and publish the names of the individuals, the Clerk noted that the committee must have regard to the 'adverse evidence' provisions in Privilege Resolution 1(11) to (13), which require committees to provide a person with reasonable opportunity to respond to adverse comments. The Clerk elaborated:
The committee will need to consider whether evidence identifying a person as being involved in the matter amounts to adverse evidence and, if so, will need to apply the provisions identified above. This will particularly be the case where the extent of a person’s involvement is unclear to the committee.
1.59On Monday 29 May 2023, the Acting CEO of PwC Australia, Ms Kristin Stubbins, penned an open letter, in which she apologised on behalf of PwC Australia for 'sharing confidential government tax policy information and for betraying the trust placed in us'.
1.60Ms Stubbins acknowledged that:
there was a clear lack of respect for confidentiality;
PwC Australia did not have adequate processes and governance in place; and
PwC had a culture at the time in its tax business that both allowed inappropriate behaviour and had not, until now, always properly held its leaders and those involved to account.
1.61In the letter, Ms Stubbins also announced that PwC had commenced an investigation, with the assistance of external counsel, into who may have shared or misused confidential information in connection with these matters; and as a result, had stood down nine unnamed partners. The identity of these individuals has not been publicly released by PwC.
1.62In an attempt to improve their internal structures, Ms Stubbins explained that PwC Australia has commenced a process to 'ringfence' the provision of services to government:
We are moving to quickly establish separate governance and oversight arrangements for the business by the end of September. It will cover all services to Federal Government Departments and Agencies, include people, operations and governance within its perimeter and be operationally ringfenced from other businesses within PwC Australia. The business will have a standalone Executive and Governance Board who will have the responsibility to consider the strategic options for the business. This will establish independence and enhance controls relating to confidentiality and conflicts. PwC will consult with the Australian government on these arrangements including timing and process.
1.63Late in the evening on Friday 2 June 2023, PwC provided answers to written questions on notice from the FPA References Committee. The answers contained two versions of the requested information. The first version included an unredacted list of the names of 63 individuals—current or former partners, and personnel—who received at least one email containing confidential information relating to the MAAL. PwC requested that the committee keep this unredacted version confidential. In the second version, PwC had redacted the 63 names and the names of five partners under review in relation to execution of their relevant executive and governance responsibilities, and also redacted the name of a company which was provided confidential ATO information relating to the MAAL.
1.64In an accompanying letter, PwC made the following points as reasons for redacting the names:
Not all personnel who received information will have been involved in wrongdoing.
The email was addressed to two large distribution groups.
The email did not on its face indicate that the information it contained was being disclosed in breach of confidence.
Receipt of such communications does not necessarily indicate involvement in a breach of confidentiality.
1.65PwC also advised the committee that PwC has not to date formed a view that the 63 persons identified in its answer to the committee were involved in a breach of confidence, except for four persons who PwC did identify.
1.66On 5 June 2023, the Australian Financial Review reported that PwC had written to partners to advise them that PwC had provided this information to the committee, along with the names of partners who were directed to go on leave pending the outcome of PwC's investigation related to the confidentiality breaches. The persons that PwC did identify were also reported: four former partners who have all since left PwC, Messrs Peter Collins, Michael Bersten,Neil Fuller, and Paul McNab.
1.67Following the answers from PwC, Senator Deborah O'Neill sought advice from the Clerk of the Senate in relation to reports that PwC had provided a list of names to the committee of those involved in the misuse of confidential government information. The FPA References Committee agreed to formally receive and publish the Clerk's advice on its website.
1.68In his advice, the Clerk expanded on aspects of his previous advice to the FPA Legislation Committee. The Clerk observed that the challenge for the committee in applying the adverse comment provisions 'should not be underestimated'. He also pointed out:
It seems to me that PwC is best placed to minimise the reputational damage likely to flow to staff it says were only peripherally involved, by publishing accurate information about their involvement, rather than leaving it to the committee or others to pick through available information.
1.69The Clerk also provided further advice about the possible creation of a pool evidence unable to be examined by the courts:
The fact that the Tax Practitioners Board (TPB) has put redacted PwC emails before the Economics Legislation Committee does not put those documents beyond the reach of investigators and the courts. This is because the emails have a previous life. They can be sought directly from the TPB or from PwC itself if they are required as evidence in criminal proceedings. There is no risk involved in the committee seeking unredacted versions of the emails from TPB or PWC, because again the originals may be sought from those entities rather than from the parliament. In short, the privilege attracted by submitting the emails to the committee and their subsequent publication does not prevent their being used for forensic purposes before the courts.
1.70The Clerk clarified that:
The same would be true of the list of names provided by PwC and any supplementary material. The primary PwC sources used to compile the material would be accessible to investigators and, if required, to the courts.
Committee view
1.71In 2013, Mr Peter Collins signed his first confidentiality agreement with Treasury to participate in confidential consultations relating to Australia's multinational anti-avoidance tax laws. As the National Leader of International Tax Services at PwC, Mr Collins' involvement with Treasury and the Board of Taxation necessarily placed him and PwC in a conflicted position. As the Tax Practitioners Board (TPB) noted, this conflict arose due to the potential market advantage of PwC and Mr Collins having knowledge of this confidential information and the fact that it could be utilised to advance the position of PwC's existing taxation clients as well as marketing its services to attract new clients.
1.72Mr Collins intentionally shared confidential information obtained through Treasury consultations with PwC partners and personnel in Australia and overseas. In sharing this confidential information, Mr Collins sought to assist existing and potential new clients of PwC to avoid the soon to be introduced Multinational Anti-Avoidance Law (MAAL) in 2016. This put at risk $180million per year of tax to be paid in Australia and generated new income of at least $2.5 million for what PwC envisaged would be the first tranche of its services to those clients.
1.73As the internal PwC emails received and published by the Senate Economics Legislation Committee reveal, Mr Peter Collins and certain other PwC partners had no regard for their obligation to maintain the confidentiality of Treasury consultations and information. Equally, their desire to aggressively monetise confidential Commonwealth information demonstrates no regard for the public interest and the efforts of the then government to prevent multinationals from using complex and artificial structures to escape paying their fair share of tax in Australia. It is clear that the desire for personal gain trumped any obligations that PwC had to the Commonwealth of Australia and its citizens.
1.74This was a calculated breach of trust by PwC.
1.75While Mr Collins is a central figure in these events, it is evident from the internal PwC emails brought to light through Senate Estimates that his actions were understood to be problematic for PwC if ever made public, and yet were supported and condoned within PwC. There is no evidence that PwC colleagues or leaders called out this behaviour for years, up until it became publicly known in 2023.
1.76Indeed, PwC subsequently sought to protect its reputation by effectively stonewalling the Australian Tax Office (ATO) in its pursuit of documentation related to the misuse of confidential information by Mr Collins and other PwC partners. Based on evidence from the ATO, it is open to the committee to conclude that PwC did this by the inappropriate and incorrect application of legal professional privilege to tens of thousands of PwC documents. In this regard, the committee notes a relevant Federal Court case involving the Commissioner of Taxation versus PricewaterhouseCoopers [2022] FCA 278. In that case, Justice Moshinsky ruled that PwC had incorrectly applied legal professional privilege to more than half of approximately 15500 documents requested by the ATO. It seems clear that PwC's use of this tactic is not restricted to the Collins matter.
1.77The committee also notes the requirement in the Tax Agent Services Act 2009 for entities to report any breaches or suspected breaches under section 30 of that Act. PwC had an obligation to report the breach of confidentiality by Mr Collins long before the TPB commenced its investigation. However, PwC chose not to do so, in breach of its legal obligations.
1.78The committee is also aware from statements on the public record during FPA Senate Budget Estimates 2023–24 by the Secretary of the Department of Finance, Ms Jenny Wilkinson PSM, and indeed, the public pronouncements of PwC, that PwC considers several other partners to have been involved in the breach of confidentiality. This indicates that PwC should have self-reported several other breaches but failed to do so.
1.79Two aspects of PwC's approach are particularly striking.
1.80First, the incorrect application of legal professional privilege to tens of thousands of potentially incriminating documents.
1.81And second, the conspicuous failure to report a serious breach of confidentiality when PwC had a legal obligation to do so.
1.82Taken together, the committee concludes that PwC engaged in a deliberate strategy over many years to cover up the breach of confidentiality and the plan by PwC personnel to monetise it.
1.83It stretches credulity that the senior leadership of PwC were ignorant of all this. The application of legal professional privilege to large volumes of documents must have had approval from the most senior levels within PwC. Former CEO Mr Seymour has confirmed that he received emails from Mr Collins related to the confidential Treasury information.
1.84In addition to its history of cover-up, PwC's recent response to this matter has been less than satisfactory.
1.85PwC has given every appearance of attempting to minimise the seriousness of the issue, hoping that standing down its CEO, Mr Seymour, and announcing the Switkowski review of PwC Australia's culture, governance, and accountability, would suffice to assuage public concern.
1.86The open letter on 29 May 2023 from acting CEO, Ms Kristin Stubbins, came nearly six months after Mr Collins and PwC received sanctions from the TPB. It is PwC's first public response to the issue. There have been no media conferences or public interviews beyond this simple letter.
1.87Even so, the letter from Ms Stubbins conspicuously avoids addressing the key issues at the heart of the matter: the obvious conflict in an accounting, auditing, and consulting firm providing tax consultancy advice to government and at the same time providing tax advice to private sector clients; and the unlawful misuse of confidential tax information obtained through a process of providing advice to government, which was monetised for the benefit of the firm and its clients.
1.88It is clear to the committee that the TPB found PwC would have, or should have been, aware of the perceived and actual conflict of interest which existed in relation to its duties and activities as a tax agent and that it failed to ensure adequate arrangements were in place to manage these conflicts.
1.89Serious questions arise about the structural and dishonest nature of these conflicts, and the committee intends to consider this issue further during this inquiry.
1.90The committee also has concerns about the extent and timeliness of official investigations by the ATO and TPB. Policy questions arise in relation to the restrictions imposed by certain secrecy provisions within the Tax Administration Act 1953 and the constraints on the ability of the ATO to share sufficient information with the AFP, TPB, the Treasury, and relevant ministers, to ensure fulsome and timely investigations can occur. While these are matters beyond the scope of this report, the committee may revisit them during the inquiry.
1.91The committee notes the internal investigation that PwC is undertaking into which PwC personnel may have shared or misused confidential information.
1.92So far, PwC has stood down nine partners. PwC has chosen not to publicly name those individuals.
1.93In addition, PwC publicly named four former partners on Monday 5 June 2023 as having received confidential information relating to the Multinational Anti-Avoidance Law. Those partners were Peter Collins, Michael Bersten, Neil Fuller and Paul McNab.
1.94And yet, on 5 June 2023, acting CEO Ms Stubbins also noted that the PwC investigation is ongoing.
1.95The question therefore arises about the basis on which PwC decided to select the nine partners to put on leave and the four partners to name.
1.96Add to that the widespread confusion caused by multiple versions of lists in circulation with the names of PwC partners and other personnel with alleged involvement in the use of confidential government information to gain new clients and assist existing PwC clients.
1.97This brings us to the provision by PwC of a list of 63 names to the committee that PwC asked the committee to keep confidential. PwC did not provide the committee with any indication of the extent to which each of the 63 named individuals were involved in the breach of confidentiality and the plan to monetise that information. In that regard, PwC did not give the committee any basis on which to determine the involvement or otherwise of the people on the list.
1.98The committee expresses its displeasure at PwC for placing the committee in such an invidious position.
1.99The committee is aware of the significant public interest in knowing who is responsible for PwC's calculated breach of trust.
1.100However, as noted in the Clerk's advices, there are competing public interests. As such, the committee has considered two key factors in deciding whether to accept and publish the names of those potentially involved.
1.101First, the possible creation of a pool of evidence inadmissible in court by dint of it being covered by parliamentary privilege, and the committee's desire to ensure the perpetrators and any relevant entity are brought to justice. In this regard, the committee has been mindful of the Clerk's advice with respect to the danger of defendants deliberately placing material before a parliamentary committee in the hope of aborting or disrupting the court proceedings. The committee is operating on the basis that an active police investigation is underway and has therefore been wary of taking evidence relevant to legal proceedings.
1.102Nonetheless, the committee is reassured by the Clerk's advice that the primary PwC sources used to compile the material would be accessible to investigators and, if required, to the courts. And, therefore, that publication of the 63 names would not, in and of itself, create a pool of inadmissible evidence.
1.103Second, the committee has considered procedural fairness in relation to naming everyone who appears on an email distribution list, noting that such an appearance may not mean a person was involved or knew about the confidentiality breach.
1.104The committee notes the Clerk's advice that evidence identifying a person as being involved in the matter may amount to adverse evidence and, if so, would require the committee to apply the provisions of Privilege Resolution 1(11) to(13).
1.105In this regard, the committee notes PwC's statement that not all individuals who received an email containing confidential information were necessarily involved in any wrongdoing.
1.106Based on its consideration of procedural fairness, the committee has decided, at this juncture, not to release the names of those 63 individuals provided to the committee by PwC. The committee will publish the version of the document redacted by PwC discussed at paragraph 1.63 as an attachment to this report (see Appendix 2), and as answers to questions on notice on the committee's website.
1.107The committee concurs with the Clerk of the Senate's view that PwC is best placed to minimise the reputational damage likely to flow to personnel that PwC says were only peripherally involved in the breach of trust.
1.108To that end, the committee considers the onus is on PwC to promptly publish accurate information about the involvement of PwC partners and personnel in the interest of the transparency and accountability it claims to be working towards.
1.109Further, it is manifestly clear that PwC has failed in its duty of care towards its own partners and personnel. This failure extends not only to the staff on the list who may not have been involved in the breach of confidentiality. But it also extends to all other partners and personnel of PwC whose reputations may have been unfairly tarnished by association. Again, this indicates that PwC does not appear to understand proper process, nor do they see the need for transparency and accountability.
1.110The question therefore arises: given the extent of the breach and subsequent cover-up now revealed on the public record, when is PwC going to come clean and begin to do the right thing?
1.111This leaves a further question unanswered: is PwC's internal culture so poor that its senior leadership does not recognise right from wrong, and lacks the capacity to act in an honest, open, and straightforward manner?
1.112As a tax agent and a provider of consulting services for government, PwC is in a fundamentally conflicted position. PwC's failure to recognise and manage this conflict speaks to poor corporate culture and a lack of decent governance and accountability.
1.113PwC's undertaking to 'ringfence' the provision of services to government may improve circumstances by establishing separate governance and oversight arrangements for the business. However, PwC is yet to advise what this 'ringfencing' will look like in practice.
1.114Finally, the committee notes the current ongoing investigations by the AFP and the TPB. While the committee has been careful not to prejudice either investigation, the committee is firmly of the view that PwC has an obligation to cooperate fully and openly with both investigations.
1.115The committee will return to these matters in the final report and recommendations.
1.116The committee recommends that PwC cooperate fully and openly with all investigations and inquiries into this matter, including the investigations by the Australian Federal Police and the Tax Practitioners Board.
Recommendation 2
1.117The committee recommends that PwC be open and honest with the Australian Parliament and people, and with the international community, by promptly publishing accurate and detailed information about the involvement of PwC partners and personnel (including names and positions) in the matters canvassed in this report.
Senator the Hon Richard Colbeck
Chair