Bloomberg Tax
May 24, 2023, 9:47 PM

PwC Australia Tax Scandal Fuels Global Implications: Explained

Michael Rapoport
Michael Rapoport
Senior Reporter, Bloomberg Tax

As PricewaterhouseCoopers’ Australia tax scandal moves into a new phase, the ramifications are likely to stretch far beyond Australia’s borders.

The scandal deals with an Australia-specific matter: PwC Australia’s misuse of confidential government tax information. But any investigation, like the one that Australia’s Treasury asked for on Wednesday, could extend into the US, in part because PwC’s Australia partners are believed to have shared the information with clients in the US. PwC’s US and UK affiliates have already expressed concerns.

While it isn’t yet clear whether other parts of PwC could be held liable for PwC Australia’s actions, the scandal also could deal a big hit to PwC’s global reputation, especially in the wake of a series of scandals at Big Four accounting firms in recent years that have called their ethics and performance into question.

PwC Australia says it “will continue to cooperate fully with any investigations into this matter.” The firm’s global governing body and the US and UK affiliates declined further comment.

Here’s a closer look at the fallout from the scandal.

What did PwC Australia do?

PwC partners took confidential information that a PwC executive had obtained while he was on a government advisory board—information detailing the government’s plans to crack down on corporate tax avoidance—and used it to solicit corporate clients to use the firm’s tax-planning advice, according to emails that were released after demands from Australia’s Parliament.

“This leak breaks every ethical rule in accounting,” said Richard Murphy, an accounting professor at Sheffield University in the UK. “There’s a fundamental conflict between governments’ reliance on big accounting firms for tax advice when these same firms are advising companies on how to avoid these taxes.”

As a result, PwC Australia CEO Tom Seymour and two other top executives have stepped down, and PwC has brought in an outside executive to conduct an independent review of the firm. The Treasury has referred the matter to the Australian Federal Police and asked them to consider launching a criminal investigation.

What are the implications outside Australia?

Like the other Big Four firms, PwC is structured globally as a network of individual, freestanding affiliates in each country where it does business. That allows a firm in one country to avoid liability for the actions of the same network’s affiliate in another country, so it isn’t yet known whether PwC might bear any liability globally or in the US or UK for the actions of its Australian affiliate.

According to the emails, however, PwC Australia partners shared the proprietary information with clients that are believed to have included big US technology companies. And whether or not liability is established, the scandal is expected to impact PwC’s reputation worldwide.

Australian Sen. Deborah O’Neill, head of the Australian Parliament’s powerful Financial Services Committee, said earlier this month that the PwC emails contain references to Singapore, the UK, Ireland, the US and the EU, and “it’s clear this is an issue with global implications.”

Has this type of concern arisen before?

PwC and two other Big Four firms, KPMG and EY, all settled with the US government over their promotion and disclosure of tax shelters in the late 1990s and early 2000s. In the most prominent such case, KPMG admitted to criminal conduct and paid $456 million in 2005 as part of a settlement to avoid criminal prosecution.

Beyond tax, KPMG endured a US scandal in the late 2010s in which authorities say senior partners obtained secret advance information about which of its audits were to be inspected by federal regulators, giving the firm a leg up in preparing for the inspections. Six partners were convicted or pleaded guilty to criminal charges, and the firm paid a $50 million civil settlement to the US Securities and Exchange Commission.

Both KPMG and EY have also settled SEC allegations that some of their auditors cheated on compliance exams.

Will this affect governments’ use of private consultants?

The Australian leak is likely to give governments pause in enlisting PwC and possibly other large private professional-services firms that advise both governments and corporate clients on tax strategy. Murphy said the scandal shows that governments must stop relying on the Big Four for tax advice and develop their own expertise.

It could be difficult to entirely separate government tax authorities from the Big Four, however, since the firms are among the few sources for the level of expertise that the agencies need. At the Internal Revenue Service in the US, many personnel have gone through a revolving door, from working for a Big Four firm to the IRS and back again.

“That source of knowledge that’s needed to regulate—the only place that has it are the firms,” said Ally Zimmerman, an assistant accounting professor at Florida State University. “The regulators are tied to the firms for labor.”

What will happen now?

PwC is certain to face scrutiny in Australia’s Parliament during budget hearings that began this week. Lawmakers in the lower house can use the hearings to question government officials and ministers about PwC contracts. In addition, a Senate inquiry into consulting services begins June 7, and PwC is expected to face calls to testify.

— With assistance from Amanda Iacone, Michael Kapoor Deb Nesbitt and David Jolly

To contact the reporter on this story: Michael Rapoport in New Jersey at

To contact the editors responsible for this story: Jeff Harrington at; Vandana Mathur at

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