PwC Tax Scandal Comes Under Scrutiny of Australia Parliament

PricewaterhouseCoopers Australia is starting the week facing the prospect of a parliamentary grilling, as the firm fights to overcome a scandal that has begun to draw in the entire PwC global network.

The Australian firm has come under intense political pressure after revelations that a top executive shared with other PwC employees the government’s confidential plans to combat tax avoidance by multinational firms—and that they used that information to tailor tax avoidance plans to multinational firms, including Silicon Valley tech giants.

If trust is to be restored, PwC needs to “come clean” and name everyone involved in the leak, Sen. Deborah O’Neill, a member of the governing Labor Party who heads Parliament’s powerful corporations and finance committee, said Friday in an interview. PwC had 48 hours “to come clean with the Australian people,” she said, or it should be prepared for “the scrutiny that the Parliament can apply to this.”

The firm, she said, has been “contemptuous” of legislators and to the broader tax and accounting sector. “Make no mistake, the Australian Parliament is a very significant part of the ecosystem,” she said.

PWC faces the public airing starting with anticipated questions from across Parliament Monday. Lawmakers in the lower house are expected to raise the scandal at every opportunity and senators can use two weeks of budget hearings to question officials and ministers about PwC contracts. Separately, the firm is expected to face calls to testify to a Senate inquiry into consulting services starting June 7.

Leaking Government Secrets

The firm’s troubles date to January revelations that its former head of international tax, Peter-John Collins, had been barred by regulators for leaking government secrets—obtained while he was on a confidential transfer pricing policy advisory board—to other PwC members. Emails dating to 2014-2017, released following demands from Parliament, showed PwC partners using that information to shop tax-planning advice to clients. Those clients are so far unidentified, but are believed to include some of the biggest US tech companies.

In the aftermath of the email release, CEO Tom Seymour and two other top executives stepped down, and Kristin Stubbins, Australia’s Audit and Trust & Risk business leader, took over the top job on an interim basis. A former telecoms executive, Ziggy Switkowski, has been brought in to conduct an independent review “of the firm’s governance, accountability and culture,” PwC said.

“We have not placed any limitations on what type of recommendations Switkowski is to make,” it said in a statement, “and we will not hesitate to take the recommended actions, including, where appropriate, exiting further people and partners from their roles.”

The firm also said it was complying with a Tax Practitioners Board order to improve its processes and training on confidentiality and conflicts of interest.

“We are committed to learning from our mistakes and ensuring that we embrace the high standards of governance, culture and accountability that our people, clients and external stakeholders rightly expect,” Stubbins, the acting CEO, said in a statement. “Dr. Switkowski will have access to all the people and information he needs to conduct a rigorous and robust review. We look forward to receiving his report and acting swiftly on its recommendations.”

O’Neill said that’s not enough. PwC needs to name both those who used the leaked information and the 14 companies thought to have benefited from tax avoidance schemes based on the information, she said.

An undertaking to only a publish a summary of Switkowski’s report to PwC suggests “the continuation of a cultural cover-up, even after the US problem solvers and the team to come and manage the crisis have landed in Australia,” O’Neill said.

The prospect of reputational risk for the PwC brand has drawn the attention of the entire PwC network. On Friday, PwC’s US and UK affiliates said they had joined an internal review, with PWC US deeming the leaks “completely unacceptable.”

PwC’s global arm, which has a critical oversight function with respect to the national affiliates, has also condemned the leaks. Last week it tapped an international law firm, Linklaters, to investigate the situation. The Financial Times reported Thursday that the global firm would “seize” long-term oversight of the Australian arm, and cited two insiders as saying international executives who flew to Sydney to address the crisis were now preparing to settle in “for an extended period.”

The global firm declined to comment.

‘Truth Tellers’

The leak scandal engulfing the company is undermining trust in the accounting firms that is vital to global financial markets, O’Neill said.

Getting PwC to disclose the names of those included in the emails is necessary, she said, to restore confidence in those making investment decisions and in the financial figures they are using.

“We all have a stake in these companies being the truth tellers,” she said. “We all rely on them to be the truth tellers.”

—With assistance from Amanda Iacone.