14.4 C
Brisbane
Tuesday, May 21, 2024

Tax rorts, consultants, external Government advisors embed in Government departments. Golly gee what’s the problem

Nearly one week after the police were called, the government cannot directly say if it can stop doing business with a firm whose ex-CEO allegedly leaked Australian tax secrets.

It’s eight years since Peter-John Collins, an executive at PricewaterhouseCoopers (PwC), allegedly passed the confidential policy to colleagues advising clients on the other side of the fence: Multinationals that minimise tax.

PwC Australia chief executive Tom Seymour stood down earlier in May.

Some 80 per cent of Australians think such a leak should result in an instant ban for PwC, a poll found this month.

But on Tuesday, senior public service officials gave varying accounts of whether the firm, PwC, had been – or could be – banned for the alleged breach.

Greens Senator Barbara Pocock pressed Finance Minister Katy Gallagher on whether her department’s pledge to ban any executive involved meant they were banned from winning future work.

That was nearly eight years ago, that a “transaction” involving the policy secrets took place, Senator Pocock said.

“Are you asking us to trust you, to trust PwC?” she asked.

Senator Katy Gallagher admitted it’s still not clear how many executives are alleged to have been involved in the scheme.

Senator Gallagher said rumours of a list of executives implicated in the affair seemed to vary the number of names included.

Nor, she said, was it clear that it extended to anyone “who had knowledge of the cover-up”.

“I don’t know,” Senator Gallagher said. “I don’t think anyone does.”

Fingers in many pies

On Tuesday different mandarins had different answers about their department’s moves to impose a ban in response to a scandal still veiled in secrecy and involving a company so embedded in the public sector.

Matt Yannopoulos, the Associate Secretary of the Department of Defence, told a different committee that PwC was currently engaged to deliver $223 million worth of projects, or more than 50 individual contracts.

PwC will provide “seven or eight” staff for the department’s “cyber warfare division”; it is helping to implement a program at a cost of $3.6 million, the committee heard.

Treasury Secretary Steven Kennedy noted that the firm served a useful role for his department.

“We need people to provide insights into how the tax system works,” he said.

Dr Kennedy said he took confidence from the government announcing it had committed to a review of the Tax Practitioners Board and a strengthening of the finance department procurement protocols.

Earlier, a departmental official was asked: How many current or former partners at PwC were at the firm?

The official replied that it was difficult to say because an unknown number were “on continuing payments”.

It was not until last year that the AFP first alerted Treasury to the affair, an official notice sent one year after its first “request for confidential communication” over the matter, one official said.

Difficult to tame

Tuesday’s broader theme was the many ways PwC generated the $3 billion it brought in last financial year seem to make it so difficult to tame, be it the breadth of work, the alleged revolving door, or its status as auditor to the Treasury.

The education, employment and workplace committee heard that large companies were increasingly using their corporate structures to use their own labour-hire arrangements.

One of PwC’s business lines is called the “enabling function” and it involves providing personnel or expertise to government departments.

In 2020-21, PwC’s local consulting arm, PricewaterhouseCoopers Aseanz Consulting Pty Ltd, paid less than $2 million in tax off $775 million revenue, according to ATO corporate transparency data published online.

Its financial advice, audit and “enabling” business arms are separate entities.

A spokesman for the firm claimed its affairs had been reviewed by a former ATO official in 2021; the tax office was contacted for comment.

Kristin Stubbins, acting chief executive at PwC, admitted they could have done more.

“We recognise that our stakeholders want more transparency in order to restore confidence in our firm,” she said.

Nine PwC partners had been directed to go on leave, effective immediately, while the chairs of its governance board and its designated risk committee had stepped down of their own accord.

Waiting for other PwC shoes to drop all over Canberra

That’s over 19 lobbyists for every member of the lower house.

Pigsfly News surmises that as PwC were embed almost everywhere in Government it was common knowledge that the ATO (Tax office) under law could not tell anyone they thought PwC was rorting Australia by using confidential information for their own self serving interest..

Perhaps the loss of this 2019 case https://www.ato.gov.au/law/view/view.htm… Commissioner of Taxation v Glencore Investment Pty Ltd auditors and advisors (PwC) working both sides of the street should in any lay persons thinking caused government employees to see then large dots and connect them and do something like talk to Ministers of Government.

Na all too hard.

Besides PwC continue to have the ear of everyone and arguments against them would just fall on deaf ears. Just like it is now. .

The Australian Taxation Office (ATO) raised concerns about a confidentiality breach at PwC to Australian Federal Police (AFP) in March 2018, but a lack of detail meant no investigation was launched.

Police last week launched an investigation into a former PwC executive over the use of confidential information.

The ATO commissioner has outlined efforts his team made to try investigate the the PwC matter in 2016. He said the ATO’s laws meant it was limited in it what information it could pass to police

ATO Commissioner Chris Jordan appeared before Senate Estimates on Tuesday night to outline the efforts his team made to try to investigate the matter involving the accounting and consultancy firm right back in 2016.

“Despite our best efforts, due to the obstacles placed in our path, it took a long time to obtain the information requested,” he said.

The ATO assigned an assistant tax commissioner and about 20 staff to look into whether PwC had been involved in a significant tax leak that attempted to help multinationals avoid paying tax.

“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.

Some information was passed onto the AFP, but Mr Jordan explained that the ATO’s laws meant it was limited in it what it could provide.

“It comes back to the restrictive nature of our secrecy provisions — it is an offence under our laws for us to provide information that we are not allowed to do so by law,” Mr Jordan said.

“It’s a necessary thing in 99 per cent of cases, but clearly this is an example where maybe we should have been able to disclose that at least to Treasury.

“It’s very restrictive, and one would have to question if that’s the right situation for the future.”

While the laws allowed some information to be provided to the AFP in 2018, the matter was never discussed with Treasury

The ATO’s Jeremy Hirschhorn said that was because the agency was not allowed to do so.

‘We expressed general concerns to Treasury [in 2018] but due to secrecy [laws] we could not share specific information or share specific concerns,” he said.

‘Insufficient information’ to support formal referral to AFPMr Hirschhorn said a joint decision between the AFP and the tax office was made not to press ahead with a police investigation looking into PwC in 2019.

“It is fair to say that the information in our possession was indicative that there may have been an offence but, after a year’s consideration, this was not a frivolous decision,” he said.

“After a year’s consideration, there was insufficient information to move.”

In a statement, the AFP said the ATO requested advice in relation to the potential misuse of government information by PwC.

“The ATO sought advice on whether there was sufficient information to make a formal referral of the matter to the AFP for investigation,” it said.

“A set of representative sample documents were provided to the AFP.

“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.”

Treasury refers PwC matter to AFP

The Australian Federal Police (AFP) launches a criminal investigation into a former executive of consulting firm PwC, after he used confidential Treasury information to benefit the firm’s client base.

Last week the AFP launched an investigation after Treasury secretary Steven Kennedy asked the AFP to consider a criminal investigation into the firm’s former head of international tax, Peter-John Collins.

The AFP said in a statement it would not outline the details of what would be examined.

“On Wednesday 24 May 2023, a report of crime was provided to the AFP relating to this matter for the first time,” the statement said.

An investigation is underway and no further comment will be made.”

During Senate Estimates, Greens senator Barbara Pocock declared the current rules were not fit for purpose.

“We are looking at a broken system … the absence of criminal investigative powers and you were unable to investigate the matter further,” she said.

However deputy Treasury secretary Diane Brown insisted secrecy provisions were necessary in part to protect the reputation of people being investigated and the laws also gave confidence in regulators and an assurance that information was properly used.

She outlined to senators that there was a review currently being conducted by the attorney-general’s department into the laws.

“The review will seek to address concerns raised by multiple reviews about the number, the inconsistency, the appropriateness and complexity of Commonwealth secrecy offences,” she told Senate Estimates.

Public consultation opened earlier this year and has now closed.

The final report is due by June 30.

Cost to the taxpayer.Mr Jordan said the actions of the ATO, despite being curtailed by secrecy laws, ensured that big companies did not skirt around the new tax laws.

“Our immediate action prevented any loss of revenue to the Commonwealth from a scheme to avoid the MAAL (multinational anti-avoidance law). We estimate the revenue at risk was $180 million annually,” he said.

“We are not afraid to take on the big end of town. We have, and we will keep doing so.”

However, there was a cost to taxpayers in the sense that a number of ATO staff were taken off their regular duties to look into the matter.

Mr Hirschhorn outlined the reallocation of employees to address the confidentiality breach.

“By the start of 2019 we actually took an assistant commissioner offline … with a team of, I think, 20 or so staff … solely focused on dealing with these matters.”

Labor senator Deb O’Neil said the actions of a PwC staff member did cost taxpayers money because ATO staff were not working on other matters.

“That is a cost to the Commonwealth, a redirection of resources to combat a scheme that was designed off the back of Australia’s confidential information by Mr Peter John Collins of PwC Australia and monetised by PwC Australia and PwC global,” she said.

Sign the petition for a lobbying inquiry

Do it now

Powerful industries like gambling, mining and tobacco spend millions of dollars employing lobbyists to meet with politicians in secret. Over 3000 of these professional industry lobbyists walk the halls of our federal parliament, working to influence policy decisions in their favour.

That’s over 19 lobbyists for every member of the lower house.

Lobbying is a legitimate part of a representative and functioning democracy. However, unregulated lobbying carries with it a real risk of corruption and disproportionate influence.

Lax regulation and weak enforcement are allowing the influence of powerful industries to remain secret.

We’re campaigning for a national law to regulate lobbying – to ensure it is transparent and open, protect government decision-making from undue influence, and improve public trust in our democracy.

The first step in winning these reforms is a parliamentary inquiry into lobbying, with broad remit to call witnesses and hear evidence about the extent and impact of professional lobbying on Government decision making.

Sign the petition to support a Parliamentary Inquiry into Lobbying.

Sign the petition for a lobbying inquiry

Do it now

Exxon confirms Tax Office in pursuit as it and Chevron rip $13bn dividends out of Australia

Woohoo! Two of the biggest tax cheats, ExxonMobil and Chevron (auditors for both are PwC) have finally begun to pay a mite of income tax in Australia but they also ripped out more than $13bn in dividends and returns of capital last year. Michael West reports their latest financials.

The financial statements for the year to December for ExxonMobil Australia and Chevron Australia filed recently with ASIC show the stupendous profits being made and puny taxes being paid by the foreign oil and gas giants in this country.

For the eight years prior, Exxon had racked up $82bn in total income in Australia without paying a cent in corporate income tax, according to ATO Transparency reports. Both companies, despite their disgraceful records paying tax, are demanding public money from government for carbon capture and storage (CCS) projects.

As Australians prepare for further hikes in their gas bills – and their electricity bills too (gas determines the price of electricity) – they can draw mean comfort from the fact that these multinationals are failing abjectly to pull their weight, to earn or deserve a social licence to operate in Australia.

Their lobbyists too. Meanwhile, gas industry peak body group APPEA (of which they are key financiers), is concealing its own financial statements and no longer files them with the corporate regulators.

Yet they bemoan what the mainstream media decry as the “gas tax hike”, a tiny $2.4bn in PRRT which is less a tax increase than an ‘upfronting’ or bringing forward of that tiny $2.4bn by 5 years – tax they were due to pay anyway.

The 2022 financial reports for the oil giants also show ExxonMobil confessing to tax cheating. It is the same sort of caper for which the Tax Office pinged Chevron in historic litigation five years ago, cheating on the price at which they lend money to themselves. Typically this ‘transfer pricing’ of loans entails a foreign entity lending money to an Australian entity at higher interest rates than the local entity needs to pay – therefore the interest is siphoned offshore with no obligation to pay tax.

Among the key nosebleed numbers in their accounts, Chevron showed revenue rising to $16bn in 2022 from $8.7bn the previous year. Profits rose from $4bn to $11.5bn and tax expense from $1.5bn to $3.4bn. Its cashflow statements showed tax paid rose from just $14m to $498m.

Both ExxonMobil and Chevron have been two of Australia’s most egregious tax dodgers for the past decade (see Top 40 Tax Dodgers chart at the bottom of the page). Both are audited by PwC.

The most stunning element of these most recent accounts showed the profits being ripped offshore due to Australia’s weak and highly flawed tax regime. This story by Daniel Bleakley shows what might have happened if Australia had mimicked Norway and its sovereign wealth fund.

Chevron Australia, although it has finally begun to pay some income tax, funnelled out $7.3bn in dividends to its offshore parent company and a $3.3bn return of capital.

Both companies also helped themselves to dozens of millions of dollars on billions in loans from their offshore related parties (the same thing which has landed them in multi-year disputes with the ATO.

For ExxonMobil’s part, it recorded a rise in revenue from $12bn to $20bn in 2022 thanks to record oil and gas prices arising from the War in Ukraine. Profits jumped from $2bn to $5.6bn and tax expense from $678m to $1.4bn (bear in mind a good part of this is tax paid in PNG and Indonesia).

Its dividends to related parties offshore from rose $2.9bn to $3bn and related party interest expense stood at a towering $557m last year.

While the hunters are in full tally-ho mode pursuing the PwC fox finally flushed out of the Canberra thicket, there is a whole colony of rabbits quivering in the long grass, awaiting dogs picking up their scent.

To mix my metaphors, there is a footlocker of shoes yet to drop from the PwC scandal – and not on PwC.

There are hobnails due for Treasury, the AFP, the Tax Practitioners Board, the ATO and their political masters. Maybe or maybe not actual elected individuals, but certainly the hive of political advisers and handlers that comprise the modern politician.

And the theatre mounted by Treasury and Finance last week – the shows of outrage and referral to the Australian Federal Police – have been exposed as confected farce. The headline performances have been turned into embarrassments by the ATO.

ATO truth bombs

The ATO dropped bombs in the Tuesday night session of estimates.

The AFP was consulted by the ATO over Peter Collins’ breach of confidentiality for two years from March 2018 – and the AFP decided it didn’t have enough to launch an investigation. With the effective theft of information from the Commonwealth, Plod plodded nowhere.

The ATO “expressed general concerns” to Treasury in 2018 when asking it for a copy of Peter Collins’ confidentiality agreement – but not for the first time, it seems Treasury is peopled by dolts.

The ATO eventually handed over what it had on PwC and Mr Collins to the TPB in 2020. That’s three years ago now.

Three years of steaming manure in its lap and the considered folk of the TPB in January issued a quiet press release announcing it was sinbinning Peter-John Collins for two years for making “unauthorised disclosures of this confidential law reform information to partners and staff of PwC” and told PwC “to have processes and training in place to ensure conflicts of interest are adequately managed”.

Like being savaged by a dead sheep, as someone once said.

Except that the Australian Financial Review’s Neil Chenoweth was onto the release and knew a hot story when it was smoking.

Then a curious thing happened – a very slow burn. Chenoweth kept at it and PwC received a few mentions elsewhere, but what was clearly a red-hot issue curiously only smouldered until being fanned in Senate Estimates on February 15 and then bursting into public flame last week.

Both ExxonMobil and Chevron have been two of Australia’s most egregious tax dodgers for the past decade (Click button below to explore Top 40 Tax Dodgers chart). PwC

audits and provides consultancy services to both ExxonMobil and Chevoron. Then throw a dart at any in the Top Forty Tax Dodgers list and see if they also have tax consultancy from Pwc or maybe one of the other Big 4. Not surprisingly all of these Consultancies have contracts and provide policy advice to the Australian Governement. WTF by the billions

The Top Forty Tax Dodgers

Chevron Australia, although it has finally begun to pay some income tax, funnelled out $7.3bn in dividends to its offshore parent company and a $3.3bn return of capital.

Both companies also helped themselves to dozens of millions of dollars on billions in loans from their offshore related parties (the same thing which has landed them in multi-year disputes with the ATO.

For ExxonMobil’s part, it recorded a rise in revenue from $12bn to $20bn in 2022 thanks to record oil and gas prices arising from the War in Ukraine. Profits jumped from $2bn to $5.6bn and tax expense from $678m to $1.4bn (bear in mind a good part of this is tax paid in PNG and Indonesia).

ExxonMobil’s  dividends to related parties offshore from rose $2.9bn to $3bn and related party interest expense stood at a towering $557m last year.

Senate Estimates drama

Back with the hounds, Sherlock Holmes’ dog that didn’t bark came to mind watching Senate Estimates on Tuesday: LNP senators seem to have little interest in matters PwC.

Indeed, after the Tax Commissioner threw his bombs, Liberal Senator Andrew Bragg went to asking questions about franking credits – not that the LNP needs to underline its irrelevance.

Senator Barbara Pocock doggedly pursues in estimates what has happened. Photo: aph.gov.au

Not so Labor and Greens, led by Senators Deborah O’Neill and Barbara Pocock respectively.

The former unleashed previously sleepy hounds by tabling the wad of incriminating PwC emails last week, the result of questions on notice she put to the Tax Practitioners Board following the February 15 estimates hearing.

Suddenly, months and years later, Treasury and Finance were shocked, shocked, to find that gambling was going on in here.

No, sorry – that was Captain Renault in Casablanca. Treasury and Finance were shocked, shocked to have their noses rubbed in what the AFR had been writing.

Tardy Treasury response

On Tuesday morning, Senator O’Neill sniffed closer to the rabbits, seeking a timeline from Treasury Secretary Steven Kennedy about when Treasury first became aware there was something rotten in the state of PwC, that information was being stolen from the government, that there was an investigation under way.

Dr Kennedy knew such questions were coming, said as much, had answers carefully prepared, wording delicately weighed, and a deputy-secretary to front the bus for him.

Senator O’Neill ran out of time before exploring in greater tempting detail which tortoise found out what when, but the immediate headline is that Treasury “was requested information” in 2018 about PwC.

That was five years ago.

You might think Treasury’s interest would have been piqued. Nah.

“We left it to the ATO.”

And the ATO has secrecy requirements – “we couldn’t get more detail … we weren’t able to ask”.

Meanwhile, happy relations and big fat contracts with PwC continued.

Secrecy limitations

The ATO itself was smelling a rat much earlier – 2016 – and the rat was the house of PwC in general and, from 2017, Peter Collins in particular.

But, you know, secrecy.

Tax Commissioner Chris Jordan railed in Estimates against the extreme secrecy laws governing the ATO and its legal inability to mount a criminal investigation.

The ATO sought the advice of its general counsel and was told it couldn’t tell anyone about the Peter Collins/PwC outrage other than the AFP.

Mr Jordan said that also turned out to be the advice of the Commonwealth Director of Public Prosecutions and the Australian Government Solicitor.

The ATO “shared its information” with the AFP in 2018 and 2019 until it was decided the AFP didn’t have enough to launch an investigation.

Faking it?

Treasury now referring the matter to the AFP means either Treasury, the AFP or both are faking it for the cameras.

I’d bet they didn’t guess the ATO would drop them in it.

In 2019 the ATO allocated an assistant commissioner and 20 staff to exclusively focus on Peter Collins and PwC.

Over years of legal battles involving what Mr Jordan called “highly ambitious if not false privilege claims”, the ATO scored PwC’s internal emails among “thousands and thousands” of pages of information.

And all the ATO’s legal advice eventually would let it do was hand information over to the TPB in 2020.

Slowly spin the TPB’s wheels – and it is saying nothing further now in response to our questions.

Email trail

According to the ATO, the TPB seemed to acquire more “interesting” PwC emails as there were emails tabled last week that the ATO did not have.

Senator Deborah O’Neill probes government employees about emails on Tuesday. Photo: AAP

And Senator O’Neill tabled more emails on Tuesday. A particularly rich one sent from Peter Collins’ phone in September 2015 includes what looks like an automatic top-and-tail notice:

“This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding US federal, state, or local tax penalties.”

But for avoiding Australian tax, hey, go nuts!

It says in part: “Little real chance of anti hybrid rule anytime soon. I spent 3 payneful (sic) hours today. BoT (Board of Taxation) has zero idea. The only thing they get (now) is that it is complicated and perhaps we should not rush. No need to share this because all supposed to be secret.”

The email concerns an entity domiciled in the British Virgin Islands – the Caribbean tax haven. Mr Collins tells the recipient “The imported mismatch formulas will blow our mind but be easy to sidestep.”

And that’s why top tax partners get the big money.

The proforma “not for avoiding US tax” sentence is ripe but not the cutest in Tuesday’s tabled emails.

That title goes to a line Senator Pocock seized on: “OK in practice until the ATO gets grumpy and figures out the joke.”

But no hurry, it seems.

The drowsy nature of Treasury is now aided by not answering questions thanks to the easy excuse of “not wanting to prejudice” the AFP investigation. Convenient for all parties, that.

Nothing to declare

A Treasury official did not know if anyone had told the Treasurer of the day anything about anything.

Of course, there are layers between public servants and their minister.

What an extraordinary thing in a hothouse like Canberra if nobody told anybody nuffink.

Meanwhile, I’m guessing the AFP didn’t have the talent to go further with the information provided by the ATO.

Plod would have had to hire a Big Four consultancy to explain it to them, probably PwC – and it couldn’t do that. Heck, it was already employing PwC.

And for all its umbrage and bristling on Tuesday night about its lack of powers to deal with this scandal, the ATO’s failure was exposed by Senator Pocock when she asked what the ATO had done about that lack of power, what representations had it made to the Treasurer to obtain suitable powers?

The answer was that the ATO had not tried.

As Senator Barbara Pocock summarised, there’s a powerful case for the referral of this entire case to the NACC.

And there’s more …

P.S. Late on Tuesday night the AFP tossed a bunger back at the ATO bomb throwers, suggesting the ATO had only provided “a set of representative sample documents”.
The AFP statement in full:
  • In 2018, the Australian Taxation Office (ATO) requested advice from the AFP in relation to the potential misuse of government information by PricewaterhouseCoopers (PwC)
  • The ATO sought advice on whether there was sufficient information to make a formal referral of the matter to the AFP for investigation
  • A set of representative sample documents were provided to the AFP. 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
  • On Wednesday, May 24, 2023, a report of crime was provided to the AFP relating to this matter for the first time
  • An investigation is under way and no further comment will be made.

Recent Articles

spot_img

Related Stories