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Ever noticed that when a major scandal engulfs big companies – from banks to resources to casinos – that it’s the large auditing/advisory firms that are usually enlisted to dig into the bowels of the miscreant organisation to investigate the behavioural and cultural tumours?
We have just been given a rare glimpse under the hood of one of the big four accounting firms, PwC, and how it used its privileged position as a government adviser on tax policy to turbocharge a drive for new clients.
The Duco finish may look pristine, but the inner workings reveal the opposite.
PwC CEO Tom Seymour has stepped down from his leadership role in response to the firm’s tax leaks scandal.Credit: Michael Quelch
Not only did PwC breach government confidentiality, but it used the information to circumvent the government’s attempts to stem multinational tax avoidance. PwC did this all while enjoying the sweet sounds of the dollars rolling in.
It’s a classic gamekeeper turned poacher scenario, and unsurprisingly PwC is now in damage control. And you have to wonder how PwC can be relied on to fix the cultural issues of its clients when its own culture has been exposed as desperately wanting.
PwC has been under fire after it emerged in January that a former partner, Peter Collins, had been banned by the Tax Practitioners Board for leaking confidential government tax plans – which included new rules to stop multinationals avoiding tax – to other staff and partners at the firm.
Any hopes of branding this scandal as the fault of one rotten apple disappeared last Friday when a series of emails demonstrated how far the information had spread throughout the firm, and how it had been misused to drum up business from various and notorious multinational tax avoiders.
The firm’s Australian boss, Tom Seymour, has now left his post after confirming he was one of the dozens of partners who received emails relating to the government’s confidential information.
The six to eight partners who shared the emails have apparently now all gone, but this scandal is far from over.
If those running PwC believe that undertaking some kind of internal investigation into the culture of the organisation is enough of a get out of jail free card, it is woefully mistaken.
It is hard to see how the firm is now qualified to undertake such introspection.
Relationships between client and adviser are built on trust – which once broken is tremendously difficult to restore. The external push for accountability and payback has picked up a lot of momentum.
It has bled into the broader industry and spurned a larger Senate inquiry into the conflicts of interest between the governments and the big four accounting firms that provide it with expert advice.
Politicians (particularly the Greens) are placing PwC in the middle of their dartboards – and getting plenty of publicity mileage while the demoted Seymour is handing out profuse apologies.
But this is a side-show.
The PwC debacle raises questions about the use of private accounting firms to help formulate tax laws, when they are also serving their clients’ interests by ensuring they pay as little tax as is legally required.
This model is intrinsically flawed. It is the equivalent of having the same adviser on both sides of a takeover bid – acting for the bidder and for the defence.
From the government’s perspective, the use of these firms has always come with risk, but one which successive governments have been willing to take because these firms employ the best of the best. Who better to advise on the tax framework than the experts from the top accounting firms?
But these big accounting firms that have lucrative government work need to pick a side.
PwC in this instance thought it could play both sides. And it’s a decision for which it will pay dearly.
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