EY Defends Practices During PwC Australia Tax Leak Inquiry

EY Australia’s CEO sought to distance the firm from the PwC Australia tax leak telling lawmakers Tuesday it doesn’t deliberately breach confidentiality or market tax-minimization planning advice.

Big Four accounting firms and consulting companies, including Deloitte Australia and Accenture, fielded questions during a two-day Senate hearing as part of an inquiry launched after revelations that PwC Australia shared confidential tax information with companies it gained while advising the government on anti-tax avoidance laws.

“I want to specifically address the conduct that triggered this inquiry by saying that at EY we don’t deliberately breach confidentiality,” EY Oceania CEO David Larocca said. The firm didn’t participate in confidential meetings discussing the tax.

“We don’t market tax minimization schemes. We don’t use blanket legal professional privilege claims to frustrate regulators and our business model is not built on condoning, rewarding or covering up this kind of behavior,” he said.

Several schemes and structures “came across our desk for which we told clients that we do not recommend that that’s a sustainable solution,” Larocca said.

“We’re after sustainable solutions for clients around complex tax problems. That requires not a black letter law approach, it requires an assessment of policy and what the intent of the legislation is trying to achieve,” he said.

The firm decided to adopt one of the orders imposed on PwC by the Tax Practitioner’s Board to better manage conflicts of interest by keeping a central register of confidentiality agreements, said Leigh Walker, EY Oceania’s risk management and independence leader.

A system recording the agreements “triggers approvals across leadership both locally and globally. So that piece ‘nobody knew,’ ‘it was just one partner,’ that cannot happen,” Walker said.

A workplace culture review by Australia’s former sex discrimination commissioner Elizabeth Broderick following the death of an employee at the firm’s Sydney office last year raised concerns about bullying and workplace culture would be released publicly “no matter how uncomfortable that task may be,” Larocca said.

Larocca revealed he earned A$2.8 million ($1.9 million) a year. On average its 700 partners earned between A$500,000 to A$600,000.

The firm would consider providing a copy of its partnership agreement in confidence but would not provide a breakdown of partner salaries saying “its an intensely competitive market,” he said.

Deloitte Conflict of Interest

Deloitte Australia told the inquiry it uncovered one conflict of interest breach in 2023, and another of misuse of government information in 2022.

The conflict of interest related to its engagement by the Australian National Audit Office to do external audits of government agencies, it revealed in a document provided to the inquiry.

The firm breached its conflicts management policy by failing to seek the ANAO’s permission before accepting a contract with an agency to provide an assurance service while also auditing its financial statements.

Deloitte disclosed the conflict to the ANAO which “concluded the assurance services did not represent an independence threat to the financial statements being audited”, it said.

The misuse of information incident in 2021 saw the firm lose a contract with the home affairs department to provide commercial advice on a procurement. Its contract was terminated after a complaint was made by a tenderer for the project, the ANAO said in its review of home affairs’ procurement processes.