Consulting giant PwC blocked the Australian Tax Office’s attempts to garner more information about its involvement in the tax leak scandal at least six years ago, prompting the ATO to report its “significant concerns” to federal police in 2018.
ATO Commissioner Chris Jordan told a parliamentary committee on Tuesday evening his office noticed that a few multinational companies had “suspiciously and quickly” tried to rearrange their affairs after the Multinational Anti-Avoidance Law was introduced in January 2016.
In December, the Tax Practitioners Board found Peter Collins, PwC’s former head of international tax, shared confidential government briefings on multinational tax reform with PwC partners and clients to help them sidestep the laws.
Jordan said swift action in 2016 from the tax office saved the federal government from losing about $180 million a year, but the ATO’s investigations into what had occurred were frustrated by false claims of legal professional privilege.
“We had to issue further notices to obtain information that was clearly not subject to [legal professional privilege] such as internal PwC emails,” he said.
“Despite our best efforts, due to the obstacles placed in our path, it took a long time to obtain the information requested.”
Serious concerns were raised once the ATO started receiving that content in late 2017 about schemes being marketed by PwC.
“A significant concern also uncovered was the Collins matter: a potential breach of confidentiality in a Treasury consultation process,” Jordan said.
He said that unlike other revenue authorities overseas, the ATO does not have the power to launch criminal investigations.
“As the confidentiality breach was not a tax offence, we were unable to investigate the matter further and from 2018 we sought to refer this matter to the correct authority,” he said.
“After sharing information with the Australian Federal Police over the 2018-2019 period, we ultimately formally referred the matter to the Tax Practitioners Board (TPB) in July 2020.”
Under questioning during the committee hearing Jordan said a lack of criminal investigative powers, and restrictive secrecy rules the ATO has to comply with, meant that once the AFP investigation was closed the only option was the Tax Practitioners Board.
“There was nowhere else to go,” he said.
“We are not allowed to refer to their professional associations. It was literally the AFP, the [Commonwealth Director of Public Prosecutions] which would only take it on advice also from AFP, and the TPB.”
Jordan questioned whether having such strict secrecy provisions was the right balance.
“It’s a necessary thing, in 99 per cent of cases it’s very necessary, but clearly this is an example where maybe we should have been able to disclose that, at least to Treasury,” he said.
ATO second commissioner Jeremy Hirschhorn said it was the first time the tax office had come across such behaviour.
“We were horrified when we came across it,” he said.
Greens senator Barbara Pocock said: “It is absurd for you to know that a breach of confidentiality was underway, and know the individual involved and [you] cannot make any comment to anyone in Treasury about this.”
Jordan said it was what the existing law required. Hirschhorn added it was a criminal offence for ATO staff to breach secrecy rules.
An AFP spokesperson said the ATO sought advice from the service about the potential misuse of government information by PwC, and provided some sample documents to police.
“The ATO sought advice on whether there was sufficient information to make a formal referral of the matter to the AFP for investigation,” the spokesperson said.
“The AFP assessed, based on the material that the ATO provided, was that there was insufficient information in the material to support a formal referral.
“In consultation and agreement with the ATO, the matter was closed in 2019.”
Australian Federal Police launched a “priority investigation” into a person over the leak of confidential federal government tax plans last week, after Treasury secretary Steven Kennedy asked the police to investigate.
Treasury first became aware of the issue in 2018 when the ATO asked for information about a possible breach of confidentiality, Treasury deputy secretary Diane Brown confirmed on Tuesday.
“We could not get further details of their concerns, because the ATO is subject to strict secrecy provisions.”
When asked by Senator Deborah O’Neill why the matter was not immediately referred to the Tax Practitioners Board, Brown said the department was constrained by those provisions.
“Because of the operation, those secrecy provisions, we weren’t able to ask for further elaboration or reasons for why they were asking for that information. So we left it with the ATO to undertake the investigation.”
The acting head of PwC, Kristin Stubbins, apologised on behalf of the firm Monday for betraying trust and doing “too little, too late” to reform the governance and culture within the consulting giant, and said nine partners have been stood down pending the outcome of its investigation.
Kennedy said more work was being done to prevent another tax leak scandal, after Senator Pocock expressed disbelief that it took eight years for the problem to come to light.
“The transgression occurred eight years ago, the day after Joe Hockey presented his budget on the 11th or 12th of May in 2015. And PwC took action within minutes,” she said in estimates.
“For eight years, nothing happened. In three months, senators have asked questions to reveal that this is on the nose, and must stop.”
Pocock said the emails from within PwC, tabled earlier this month in estimates, did not reveal a company assisting the government in good faith.
“I see a case of aggressive harvesting of confidential information and relationships by a predatory group of tax avoiders salivating at the way in which they can make money out of these very large tax-avoiding multinational companies,” she said.
Kennedy acknowledged it has taken some time for this issue to come to light.
“Do we have cause to read to more carefully look at these issues, to review and reform the Tax Practitioners Board, to increase the penalties available, to do all those things? The answer to that is clearly yes, and that’s what the government has asked us to do and we’ve begun to do that,” he said.
“But I just want to leave you with some confidence, this matter is far from over from our perspective.”
( Information from politico.com was used in this report. Also if you have any problem of this article or if you need to remove this articles, please email here and we will delete this immediately. [email protected] )