Why Australian lawmakers are up in arms over ‘Big Four’

Australia continues to be roiled by a tax scandal. Some lawmakers and public figures calling for political parties to sever ties with consulting companies known as the ‘Big Four’ – Deloitte, Ernst & Young, KPMG and PwC. But what happened? And what does it have to do with the ‘Big Four?’ Let’s take a closer look: What happened? In August 2015, Peter Collins, then at accounting firm PricewaterhouseCooper Australia, was advising the government on anti-tax avoidance laws. According to 9News, the laws, which were set to take effect in January 2016, would target around 1,000 businesses – multinationals with global incomes exceeding $1 billion, of which it was estimated there were around 1000 businesses. “With the introduction of this legislation, we are sending a clear message that Australia has no tolerance for tax avoiders. If you are avoiding tax, the Australian Taxation Office will catch you,” then treasurer Joe Hockey stated. Collins, at the time the PwC international tax chief, allegedly shared the drafts of the laws with his colleagues.

These drafts were then allegedly used to drum up business with multinational companies.

In August 2015, one of Collins’ colleagues emailed a Google employee to confirm the likely start date for the government’s Multinational Anti-Avoidance Law (MAAL), While the 2016 start date for the law had been announced in the government’s budget papers in May 2015, the confirmation that the government would go ahead with that date came from confidential government briefings. What’s the effect on PwC?                                                             The scandal has forced out PwC Australia’s chief executive Tom Seymour, cost it at least five high-profile clients and triggered the sale of its lucrative government consulting wing for A$1. As per 9News, Collins has been banned from his field till 2024. Collins is also facing legal charges. After receiving a 144-page cache of PwC emails released by the Tax Practitioners Board, lawmakers investigating the scandal asked PwC to list companies given confidential Australian Taxation Office information about the anti-avoidance law. PwC sent a written response in June. What sources told Reuters matches information in the letter, which was publicly released with the name of the company that received the confidential information redacted. Tax officials told parliament in May they foiled several attempts by unnamed multinational firms to subvert the multinational anti-avoidance law in early 2016, months after confidential information had leaked. According to Australian Financial Review, Apple, Google and Microsoft are said to be among the 23 US firms that PwC counselled after the new laws were announced.

Uber and Facebook on Friday said they had received advice from PwC Australia about the law.

They added that they were surprised to find out PwC’s counsel may have been based on leaked government plans. Facebook said it turned to PwC after the draft legislation was released, which was in September 2015, while Uber did not spell out the timeline of when PwC began advising it. However, both companies expressed surprise about the firm’s breaches of government confidentiality. “We had no knowledge their advice may have been based on improperly obtained information,” an Uber spokesperson said. [caption id=“attachment_11885911” align=“alignnone” width=“640”] Uber dropped PwC Australia as an adviser in 2016. AFP[/caption] Uber dropped PwC Australia as a tax adviser in 2016 after “engagements” with the Australian Tax Office, the spokesperson added. Uber then restructured its tax affairs in 2017. Facebook said it was one of the first multinationals to restructure to comply with the tax avoidance law. “Facebook did not seek advice from PwC on how to comply with the MAAL until after Treasury issued the draft legislation, which is why we were surprised to learn of PwC’s alleged conduct,” the spokesperson said. PwC in June said it had listed 76 current and former partners with links to the scandal and turned over their names to the authorities, as per BBC. PwC Australia’s acting chief executive Kristin Stubbins vowed ‘severe’ consequences for anyone found acting illegally. “We have failed the standards we set for ourselves as an organisation, and I apologise on behalf of our firm,” Stubbins was quoted as saying by BBC. What about the other ‘Big Four’ firms? PwC’s troubles have a shone a spotlight on the rest of the ‘Big Four’ – and their seemingly cosy two-way relationship with the government. The Guardian quoted data from the Centre for Public Integrity as showing that the ‘Big Four’ gave $4.3 million in donations. During that period, the value of government contracts given to the ‘Big Four’ shot up 400 per cent.

Some are pushing for Australia’s political parties to stop accepting donations from the ‘Big Four’.

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The newspaper quoted Greens senator Barbara Pocock as saying, “Accepting money from someone and then awarding them a contract meets the definition of conflict of interest.” Geoffrey Watson, a board member at the Centre for Public Integrity, told the newspaper the Australian government’s “persistent over-reliance” had “a corrosive impact on the role of the Australian public service”. “The big four’s largely party-indiscriminate donations appear designed to curry favour with whoever may be in power and remind us yet again that the absence of donations caps allows well-resourced players to have an undue influence on the exercise of public power,” Watson said. “Integrity must be strengthened through appropriate lobbying regulation and closing the revolving door. Former partners of firms should be prohibited from holding public sector roles while they are receiving annuities.” UNSW associate professor Scott Donald added, “Parts of the public service have clearly been hollowed out.” “They have somewhat become captive of the industry. Maybe the scandal will be the opportunity to think more broadly about the interaction between sensitive government policy and the private sector.” Others want the ‘Big Four’ to stop receiving government contracts altogether. SCMP quoted ex- Australian senator Rex Patrick as saying that ‘morally bankrupt’ firms ought to be banned from taking money from taxpayers. “Any suggestions that Google would engage in aggressive tax evasion would be unsurprising,” Patrick added. “But if you want to engage in tax evasion, don’t knock on the taxpayer’s door. You’re either a friend of the government or you’re not.” With inputs from agencies