PwC scandal in Australia throws light on growing public use of private consultants

SYDNEY – A scandal involving a

leak of confidential information

by the Australian arm of accounting and consulting giant PwC has led to calls for a crackdown on the use of consultants by federal and state governments, including higher penalties for leaks and less hiring of external advisers.

The scandal has dominated headlines in Australia and has led to the resignation of PwC Australia’s chief executive, as well as the suspension this week of nine partners, pending the outcome of an internal investigation.

The moves follow revelations that a former partner, Mr Peter Collins, leaked confidential information about changes to tax laws to colleagues to allow his firm to try to win new work, apparently from major technology companies.

Australia’s Treasury has referred the leak to the Australian Federal Police for a criminal investigation.

At a parliamentary committee hearing in Canberra on Tuesday, Secretary of the Treasury Steven Kennedy, who is one of the country’s most powerful civil servants, described PwC’s conduct as “disturbing”. 

He said PwC had not “systematically failed us on an ongoing basis”, but reforms were needed to prevent further similar incidents.

“Do we have cause to more carefully look at these issues, to review and reform the Tax Practitioners Board, to increase the penalties available, to do all those things?” he asked. “The answer to that is clearly yes.”

The board is a body that regulates tax agents.

The Australian Tax Office told the parliamentary committee on Tuesday that PwC was behind a series of schemes designed to help multinationals sidestep tax laws.

The schemes, exposed by the tax office, would have threatened about A$180 million (S$159 million) in annual tax revenue.

An MP from the ruling Labor party, Ms Deborah O’Neill, who has led efforts to expose PwC’s activities, on Tuesday called on the consultant to release the names of the suspended partners, as well as all 53 of the firm’s partners and other staff whose e-mail addresses appeared in internal e-mails about the tax leak. The e-mails, uncovered by Parliament, redacted the e-mail addresses.

Ms O’Neill said PwC had tried to cover up the scandal and accused it of being “contemptuous” of the public.

She said firms such as PwC that are involved in preparing financial reports must act responsibly and are crucial to the proper functioning of global financial markets.

“The reality is this is a company that has not been open and honest with the Australian people,” she told ABC News.

Asked whether the Australian public could trust PwC with future work, she said: “How can we possibly trust them?”

PwC is one of the world’s largest financial services firms and employs about 328,000 people in 152 countries.

According to its website, it employs 8,000 people in Australia who provide advisory and tax services to more than 5,000 clients.

The scandal embroiling the firm has not only damaged its reputation, but also raised wider questions about the reliance of federal and state governments on external consulting companies.

The previous Liberal-National coalition government spent A$20.8 billion on consultants and advisers in 2020-21 after moving to limit the size of the civil service.

Parliamentary research found that PwC holds A$453.7 million worth of federal contracts, including major work for the Department of Defence.

Labor, which defeated the coalition in an election in May last year, has pledged to scale back the use of consultants, describing them as a “shadow workforce”.

The most populous state, New South Wales, which spends about A$175 million a year on consultants, has said that it will look at imposing multimillion-dollar penalties on advisers and firms that share confidential tax-related information.

The Greens party has called for the federal government to stop hiring PwC and to review the firm’s current contracts.

But the government said it cannot simply abandon existing contracts, adding that PwC may struggle to win new contracts until it has adequately dealt with the tax leak.

Commentator Jennifer Hewett said on Tuesday that the scandal was “turbocharging doubts about extensive use of consultants”.

“The whole saga can only intensify questions about the adequacy of government controls and processes in inevitable interactions with the private sector,” she wrote in the Australian Financial Review.

Mr Collins gained access to confidential information while advising the federal government in 2015 on measures to prevent tax avoidance by multinational companies.

He signed three confidentiality agreements, but allegedly then shared the information with colleagues.

The Tax Practitioners Board last year terminated his registration as a tax agent.

The acting chief executive of PwC Australia, Ms Kristin Stubbins, released an apology in a statement on Monday, saying the firm was determined to re-earn public trust and to “make the wrongs of our past right”.