The PwC tax scandal is an ongoing scandal involving PwC's abuse of Australian Government secrets to enrich itself and its corporate clients.
PwC, and other Big Four accounting firms, give advice to governments on writing tax law, and also corporations seeking to avoid those laws. This conflict of interest came to a head in 2015, when PwC leaked secret Australian Government tax plans to corporations, including Google, and used their privileged access to help corporations avoid a law they had helped write. The scandal has major implications implications for governments and consulting businesses in Australia, particularly PwC itself.
Following the scandal's public disclosure in 2022, PwC attempted to depicted the scandal as an single individual acting alone, but later revelations indicated that the corruption was widespread, and included PwC Australia's CEO. Further revelations came to light that have implicated other organisations in the Australian public service and consulting industry, and which became the focus of a broader discussion about government outsourcing.
A Senate Committee concluded that "PwC engaged in a deliberate strategy over many years to cover up the breach of confidentiality and the plan by PwC personnel to monetise it".
Context
The scandal occurred in the context of increasing privatisation in Australia, which began to accelerate in the 1990s. In 2015, the size of the public service was capped to 167,596 employees, which saw the public sector become increasingly reliant on outsourced labour, particularly from consulting firms.
From 2013-2023, state and federal government contracts for the Big Four accounting firms increased by 400%, and 1,270% by the federal government alone. By 2023, total federal and state spending on consultants totaled $20.8 billion per year, with $5 billion spent by the federal government alone. The federal government was PwC Australia's biggest client, with over $500 million in yearly contracts by 2023.
The general trend has been condemned as ‘privatisation by stealth’, especially for ”firms with a clear vested interest,”, like Deloitte, Ernst & Young, KPMG, PwC influencing tax law.
Treasury engagement
In 2013, the Australian Treasury engaged Peter Collins to provide advice on how to prevent multinational corporations from exploiting loopholes in tax law, thus avoiding taxes. Collins, a Melbourne resident, was the head of PwC Australia's international tax group.
This work culminated in the Multi-national Anti-Avoidance Law (MAAL), which was passed in 2015, coming into effect at the start of 2016.
Breach of confidentiality
From when Collins began his work at Treasury in 2013, he signed 3 separate confidentiality agreements to protect the secrecy of the work.
However, Collins violated these agreements, sharing confidential Treasury information with at least 53 partners at the firm, including in the tax advisory arm. This confidential information allowed PwC tax advisors to develop strategies to counter the new tax avoidance law, before the law was published in 2015.
PwC claimed that confidential information was not shared with clients, except one, later revealed to be Google. However, PwC used the confidential information to advise at least 14 companies in how to avoid the law, earning at least $2.5 million for the firm. Among the companies which attempted to apply PwC's advice to avoid the new tax laws were Uber and Facebook.
ATO response
When the tax avoidance law came into effect in 2016, the Australian Taxation Office (ATO) noticed companies reacting to the new law unexpectedly quickly, restructuring their operations to avoid the new scheme. The ATO issued notices to 3 companies to amend their structures, which prevented the schemes from being implemented. It was estimated this prevented $180 million from being lost annually.
The ATO wanted to investigate the situation to determine how the scheme could have been developed so quickly, especially given that some of the corporations were clients of PwC. The ATO inquired about its suspicions with PwC on multiple occasions, sending at least 46 formal notices to provide information, and raising their concerns directly with then chief executive Luke Sayers. Sayers later said he did not recall the requests.