'Clearly disturbing': Treasury referred PwC to police after emails exposed by Senate (2023)

The head of federal Treasury,Steven Kennedy, has labelled conduct by PwC as "clearly disturbing", as he revealed the public release of a trove of emails from the consulting firm was the catalyst for him to call on the Australian Federal Police (AFP) to investigate a significant tax leak.

Key points:

  • Treasury was able to refer PwC to police after further details were exposed by senators' questioning
  • The department secretary says the depth of the scandal is "clearly disturbing"
  • PwC partnerPeter-John Collins was first brought to Treasury's attention in 2018

PwC is under fire for using confidential Treasury information on tax laws to benefit its client base, with the AFP launching a criminal probe into one of its former partners last week.

The firm's former head of international tax, Peter-John Collins, had been enlisted by the government to help design new laws cracking down on multinational tax avoidance.

The Tax Practitioner's Board (TPB) launched its own inquiry into Mr Collins and barred him from practice until the end of 2024, after finding he had used intelligence gathered while advising government to help PwC to prepare its clients for the tax changes.

Since the scandal was made public, the firm's chief executive has quit and nine of its partners have been directed to take leave pending the outcome of an internal investigation.

Labor Senator Deb O'Neill used a Senate estimates committee to quote from a cache of emails between PwC staff about the development of new products for its clients, using the confidential Treasury information.

Senator O'Neill described some quotes from Mr Collins as "famous last words", as he made comments to colleagues that actions and decisions were "ok in practice, until the ATO gets grumpy and figures out the joke".

(Video) Treasury referred PwC to police after emails exposed by Senate | ABC News

"I think by any community standard, one could say they're clearly disturbing, and they're relevant to our considerations," Dr Kennedy responded.

"The Senate has done a very good job in exposing these issues.

"And the release of the information on the 2nd of May, from memory, was a crucial piece of information that allowed us to take a step."

Dr Kennedy said he would be very careful in answering questions from the Senate committee, so as to not jeopardise the AFP's investigation.

Last week Greens senator Barbara Pocock tried to table a list of PwC staff who had access to the information, with the Clerk of the Senate called on to provide advice as to whether that could be done.

During the committee hearing, it was revealed the Treasury was first made aware of an issue with Mr Collins in 2018, when the Australian Taxation Office (ATO) asked it for information.

But officials insisted it did not have full knowledge of what the concerns were, because of the secrecy provisions which apply to how the ATO carries out its investigations.

The TPB also requested information from Treasury in late 2020.

PwC likened to 'vultures'

While the Treasury secretary was being grilled by one committee, the Defence secretary was being questioned about his department's exposure to PwC.

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Secretary Greg Moriarty said PwC had twice offered written assurances none of its staff working on contracts with Defence were linked to the scandal, revealing the department currently had 54 contracts with the firm worth more than $223 million.

"We are working through a range of measures to assure ourselves that the nature of our relationship with PwC and the integrity of the work that we have done with them, that work will take time," Mr Moriarty told the Senate.

Some senators took the opportunity to provide their own assessment of the firm's behaviour.

"PwC have been circling like vultures to get these contracts, haven't they? That's what's been happening – you can literally see them circling to suck money off Defence, can't you?" Senator Shoebridge said to Defence's Associate Secretary Matt Yannopoulos.

Government minister Jenny McAllister suggested it was not fair for the Greens Senator to ask the Defence official to comment on the "colourful" description given to the consulting firm.

"More Dracula at the blood bank, you think, minister?" Senator Shoebridge responded.

Greens question putting 'canny fox in charge of hen house'

Senator Pocock questioned Treasury's use of consultants, such as those from PwC in developing legislation, likening it to having a "very well-educated and canny fox in charge of the hen house."

"When I read these emails, I don't see a helpful organisation or individual assisting the government in good faith to better design our tax system – 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.

Dr Kennedy responded that the Treasury did not always have "all the expertise" required to craft policies.

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"This current circumstance is clearly drawing attention to the management of conflict, our use of engaging with them on confidential information, and we will pursue vigorously any violation," he said.

"But this is a large expert community, and frankly it would make no sense for us not to draw from this large expert community.

"But… in drawing from that community, we would want a full assurance for the Australian people that behaviour is entirely consistent with the public purpose."

While clearly concerned at how long it had taken for the issue to be brought to light, Dr Kennedy said the fact it was now in the public domain and being investigated by police showed the Treasury's protocols and systems did work.

The Secretary rejected suggestions PwC had "systematically" failed his department on "an ongoing basis".

"But do we have cause to more carefully look at these issues, to review and reform the Tax Practitioner's Board, to increase the penalties available, to do all those things — the answer to that is clearly yes.

"That's what the government has asked us to do, and they've begun to do that."

ATO 'prevented any loss of revenue to the Commonwealth' in 2016

The ATO again said it first became aware of "a handful" of multinationals acting suspiciously with their tax affairs in 2016.

Commissioner Chris Jordan told Senate estimates that some multinationals were attempting to "restructure their affairs upon the introduction of the Multinational Anti-Avoidance Law (MAAL)".

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He outlined how the ATO launched reviews and audits and also put firms on notice.

"Our immediate action prevented any loss of revenue to the Commonwealth from a scheme to avoid the MAAL. We estimate the revenue at risk was $180 million annually," he said.

Mr Jordan said the information that the ATO uncovered was passed on to relevant authorities.

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

"A significant concern also uncovered was the Collins matter: a potential breach of confidentiality in a Treasury consultation process.

"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."

The AFP confirmed it received information from the ATO in 2018 but a spokeswoman said there was not enough material to progress.

"A set of representative sample documents (from the ATO) were provided to the AFP," the statement said.

"The AFP assessed, based on the material that the ATO provided, that there was insufficient information in the material, to support a formal referral.

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"In consultation and agreement with the ATO, the matter was closed in 2019."

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