On Monday, 23.1.23, the AFR reported the Assistant Treasurer; Stephen Jones as saying the government may rethink its approach to consulting with tax professionals but did not rule out continuing to use PwC despite the firm and its former head of international tax being sanctioned for breaching confidentiality rules. Mr Jones declined to say if PwC’s tax professionals would be cut out of the tax policy development process over the breaches, which involved sharing confidential government briefings with partners and clients.
Treasury ministers
“The tax advice profession is now on notice. The government wants effective consultation with the industry – our policies are better for it,” Mr Jones said. “This sometimes needs to done on a confidential basis to allow effective collaboration on issues as they arise. When the integrity of that process is breached, we may need to rethink our approach.”
Comment has also been sought from Finance Minister Katy Gallagher over the continued use of PwC professionals by the government when developing policy.
Tax Practitioners Board (TPB)
The Tax Practitioners Board terminated the registration of former PwC partner Peter Collins as a tax agent after an investigation found he had shared secret information about the government’s tax plans despite signing a series of confidentiality agreements from 2013 to 2018 (see related TT article).
Peter-John Collins, former international tax leader for PwC Australia, has had his registration as a tax agent terminated.
PwC was also found to have failed to regulate its partners and staff who knew the confidential information would be used to help clients sidestep new tax laws and to attract new clients. The firm was ordered to provide training to relevant partners and staff on how to handle conflicts of interest.
Tax Practitioners Board chairman Ian Klug said that there would be zero tolerance for tax professionals who abused their position of trust. “We are very concerned when tax practitioners abuse their positions of trust, or fail to act with integrity,” Mr Klug said. “Tax practitioners who breach this confidence will not be tolerated.” When tax professionals were involved in confidential law reform discussions, “leaking confidential information … might be seen to elevate personal and commercial profit, breaching public interest, legal and ethical obligations”, he said. The TPB oversees Australia’s 80,000 tax agents and has taken a proactive role in overseeing tax professionals under Mr Klug and the board’s CEO/secretary Michael O’Neill.
The Tax Institute
The professional body for tax professionals, The Tax Institute, said it was reviewing Mr Collins’ membership. He is a fellow of the institute and in 2016 was named the body’s corporate tax adviser of the year. “We are aligned with the TPB in taking ethical standards very seriously and require our members to act with the highest degree of compliance and professionalism,” said institute president Marg Marshall.
PwC ‘Failed to regulate’
PwC chief executive Tom Seymour on Monday said the firm had “failed the high standards we set for ourselves” and had updated its policies to “protect against this happening again”. “We now maintain a central Confidentiality Agreements register and we also have a single initial contact point (non client facing) for all Treasury, Board of Tax and other similar consultations,” Mr Seymour said. “We proactively reviewed and strengthened our controls and policies and introduced a comprehensive education program to help all our people identify and avoid any conflict risks. These actions were undertaken in consultation with the relevant agencies.“
ATO and Treasury consultation (how it’s meant to work)
Mr Collins was a member of consultation groups set up by Treasury and the Board of Taxation to provide confidential advice to the government on its Base Erosion Profit Shifting (BEPS) measures to combat international tax avoidance.
These consultation groups are used by the government to develop taxation policy that is workable while not being too burdensome on the compliance side. Partners from firms such as PwC, which is the nation’s largest accounting firm, are also brought in because they can provide insight into how clients are likely to respond to changes.
However, the process is only effective if there is trust that external parties will adhere to the confidentiality agreements they sign to participate. Mr Collins signed confidentiality agreements with Treasury that allowed him wide access to policy deliberations as he advised on Australia’s Multinational Anti-Avoidance Law, the Diverted Profits Tax and Hybrid mismatch rules.
This allowed him to help shape legislation as part of a consultation committee, and meant he knew in advance what the final form of the new laws would likely be. The TPB report says PwC was in a position to use the information to prepare ways to minimise their effect.
How far the PwC interests reach (into Government)
PwC also entered into contracts worth $329 million across the government in the 2022 financial year, up from $208 million in the previous year.
[Tax Month – January 2023, previous month, 23.1.23]