PwC Australia sidelines 9 directors as leak of tax information investigated

The Australian branch of the PricewaterhouseCoopers consultancy network said Monday that nine of its partners were ordered to take leave during an inquiry into the leaking of confidential Australian tax avoidance policy changes to corporate clients who could benefit from the information.

PwC’s acting chief executive Kristin Stubbins apologized in announcing the directors are on leave pending a review of the firm’s governance, accountability and culture. A report is due in September.

“I want to apologize on behalf of PwC Australia for sharing confidential government tax policy information and for betraying the trust placed in us,” Stubbins said on an open letter.

The scandal has damaged the firm’s relationship with its biggest Australian client, the federal government, and sparked a police investigation initiated by the Treasury Department.

It has also raised questions about how conflicts of interests can be managed with governments’ increasing use of private sector consultants.

The firm said its former Australia tax partner Peter Collins breached confidentiality while working with the Australian government on changing tax avoidance rules for large multi-national companies to prevent them from shifting Australian profits to tax havens.

Collins left PwC in October and the Tax Practitioners’ Board, an industry regulator, cancelled his registration as a tax agent in December for dishonesty and for sharing confidential government briefings with PwC partners and staff.

Internal PwC documents made public this month showed the firm’s partners and staff were told in emails about planned multinational tax avoidance legislation. Clients also were charged for advice on how to get around the new tax laws.

PwC hired an external consultant, former CEO of the telecommunications company Telstra Ziggy Switkowski, to conduct an internal investigation. The directors are on leave pending the results of Switkowski’s inquiry

The Australian Federal Police announced last week it was investigating Collins and the probe could extend to other PwC employees.

Prime Minister Anthony Albanese described what happened as “completely unacceptable.”

He said PwC could be refused future government contracts because of the breach of trust.

“Any government department undertaking work needs to bear in mind the ethical considerations that come from this PwC behavior,” Albanese told Sydney Radio 2SM.

PwC said it would “ringfence” – or separate from other PwC business – provision of services to government departments and agencies to prevent conflicts of interest.

Australia’s former trade watchdog Allan Fels, former chair of the Australian Competition and Consumer Commission, said governments at all levels were outsourcing too much work to the “Big Four” major professional services firms: PwC, Ernst and Young, Deloitte and KPMG.

“Government everywhere ... is making excessive use of consultants of this kind, and also where they use them, there needs to be much more transparency and accountability,” Fels told Australian Broadcasting Corp.

Albanese, whose government was elected a year ago, said the previous administration had shed to many public service jobs and relied too heavily on consultants to do the work during nine years in office.

“There are some plusses with some contracting out of services, but there’s also been, over a period of time, a loss in the capacity of the federal public service to provide that internal advice that avoids all of these risks, all of these for-profit motives,” Albanese said. “That is something that my government has been working on.”