PwC scandal: Australian Tax Office tried to get federal police to investigate in 2018

Repeated efforts by the Australian Tax Office to convince federal police to investigate PwC in 2018 failed because it did not have “the investigative powers” to secure key evidence.

For the first time the ATO has published a detailed timeline of the PwC scandal that confirms years of frustration at the firm allegedly withholding information about how it helped multinational companies avoid paying tax.

The timeline, which has been provided to a Senate committee, reveals that in August 2016 the ATO’s second commissioner, Jeremy Hirschhorn, directly raised his concerns with then-PwC chief executive, Luke Sayers, about concerns the firm was helping clients avoid multinational tax laws.

At another meeting two years later, it is alleged, Hirschhorn suggested Sayers “personally review the internal emails” that revealed how confidential tax policy information was shared within the firm.

The ATO also alleges that in February 2020 Hirschhorn told Sayers

• “PwC should ensure that it is fully abreast of the range of concerns the ATO has had with PwC’s Tax Group’s behaviour”.

In a statement, Sayers said he did not recall the ATO suggesting he read the internal emails.

• “I did not personally review the tens of thousands of documents and emails which PwC provided to the ATO as part of these processes, nor do I recall that being suggested to me by the ATO,” Sayers said.
• “I was not aware of the existence of a confidentiality agreement signed by Peter Collins until I read about it in the media this year. I regret that I did not know about the breach of it earlier as I would have taken firm action.”

The timeline was released in response to questions from the Labor senator Deborah O’Neill, who was critical of the firm for not acting until the scandal was made public this year.

She accused the firm of being aware of alleged misconduct “for years” and doing “nothing to censure those who participated, or to meaningfully reform the culture of their organisation”.

PwC did not respond to O’Neill’s allegations but instead referred to an internal investigation being led by former Telstra boss Ziggy Switkowski, which is expected to be released in full in September. The firm’s senior executive team has already apologised for misusing confidential tax policy information, which was passed to partners working for multinational companies in the US.

A PwC spokesperson said:

• “We have also announced plans to divest our state and federal government business, exited those who have been found to have done the wrong thing as a result of our ongoing investigation into confidentiality breaches, ended political donations and installed new leadership, including announcing plans to appoint independent, non-executive directors to the PwC Australia governance board.”

The timeline also reveals the ATO first suspected former PwC partner Peter Collins had shared confidential tax policy information with colleagues in early October 2017 – almost four years before he was banned.

In March 2018, the ATO’s general counsel began preparing legal advice about secrecy provisions and “a possible breach of confidentiality”.

That information was shared with the Australian federal police, which suggested

• “a pre-referral workshop to discuss available intelligence/evidence”.

After that workshop, the AFP said it needed more information before judging whether an offence had been committed. The ATO then sought more advice from the Australian government solicitor and began an

• “analysis as to whether PwC marketed or promoted tax exploitation schemes”.

In October 2018, the AFP agreed to further discussions with the ATO to consider its updated information, but again said it needed “further documentary evidence to determine if an offence has been committed”.

In November 2018, the ATO grew increasingly frustrated that it was not getting responses to “formal information gathering notices”, citing PwC legal professional privilege.

The ATO issued 15 notices to PwC between October 2016 and April 2021 seeking more information,

• “including client information withheld due to disputed legal professional privilege”.

The ATO considered many of these claims were “baseless” and requested advice from the commonwealth director of public prosecutions (CDPP) about possible prosecutions for non-compliance.

The ATO timeline provided to the Senate committee said.

• “The CDPP advised that it was unable to instigate a prosecution given it was unlikely that the ATO could provide the necessary evidence to enable the CDPP to prove the invalidity of the legal professional privilege claims beyond reasonable doubt,”

In late November 2018, the ATO engaged.:-

• “internal criminal investigation specialists to assist with AFP engagement”.
• These specialists reviewed the ATO evidence to “test the prospect of successfully pursuing a referral to the AFP”.

By late January 2019, those specialists told the tax office that

• “unless the ATO can gather further evidence, there is insufficient evidence to support a referral”.
• “The ATO did not have the investigative powers to obtain the evidence required,” the timeline said.

On 25 March 2019, the AFP confirmed it had closed its file on the matter and would not investigate it again until May 2023, when the Treasury referred the matter to the AFP for criminal investigation.

Read here

• https://www.theguardian.com/business/2023/may/24/pwc-tax-scandal-referred-to-australian-federal-police-for-criminal-investigation

source

• https://www.theguardian.com/australia-news/2023/aug/08/pwc-scandal-australias-tax-office-tried-to-get-federal-police-to-investigate-in-2018