PwC Australia Is Taxed by Tax Scandal

Thom Weidlich 06.01.23


PricewaterhouseCoopers in Australia is confronting a brutal crisis, a scandal arising from its tax practice. The company, which made a major announcement about it this week, seems to be scrambling to show contrition and make amends.

The situation apparently became public in January, when the Tax Practitioners Board, an industry watchdog, banned PwC Australia’s former head of international tax, Peter Collins, from practicing for two years (he left the company in October). Collins had been on a federal-government panel devising rules aimed at curtailing tax avoidance by multinational corporations.

The problem is he shared drafts of the proposals with colleagues to aid in drumming up new business from, well, international companies. Sharing confidential information from a client, even a government client, is — shall we say? — frowned upon. Australia Treasurer Jim Chalmers called it a “shocking breach of trust.” The Treasury has referred the matter to the police.

Internal Probe

The Big Four accounting firm has hired an outside outfit to conduct a probe into the handling of the information. On May 8, Tom Seymour resigned as PwC Australia CEO over the mess. On May 15, the company said it had hired business executive Ziggy Switkowski to conduct a review of its “governance, accountability and culture.”

On Monday, PwC Australia announced a slew of other reforms. (The timing may be due to hearings in the Senate this week — cynical, perhaps, but also a good crisis move.) The firm said it ordered nine partners to take a leave of absence pending the outcome of the internal probe. It is overhauling its governance board, with the chair and the head of the risk committee resigning. It will ringfence its government business, with separate governance and oversight.

New Acting CEO Kristin Stubbins also issued an open letter on Monday. “Although investigations are still underway, we know enough about what went wrong to acknowledge that this situation was completely unacceptable,” Stubbins wrote. “No amount of words can make it right.” She admitted to inadequate processes and governance. She said no clients were involved in the wrongdoing and none paid less tax due to the confidential information.

Redacted Names

Despite its efforts, a fairly new issue will continue to nettle PwC: On May 2, the Australian Senate released emails of company insiders discussing the leaked government info, though names were redacted. The company is resisting pressure to release the names of all partners involved. “We believe that the vast majority of the recipients of these emails are neither responsible for, nor were knowingly involved in, any confidentiality breach,” Stubbins wrote in her letter. We haven’t heard the last of that one.

Typically in a crisis an internal investigation gives a company a little breathing room, a chance to say, “Hey, we’re looking into it. We’ll get back to you.” PwC’s situation is so dire it felt the need to apologize, speak out and act before the probe results are in. At the very least, it’s showing a lot of action. That’s an important aspect of crisis response, especially when you’re clearly in the wrong.

Photo Credit: TK Kurikawa/Shutterstock

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