The Senate inquiry has heard that partners shared documents as well as a start date for a multinational tax regime.
Former PwC chief admits ‘multiple breaches’ of secret files
Former PwC CEO Luke Sayers has admitted there were multiple breaches of confidentiality within the firm that went beyond advising international clients that a revised tax regime would apply from a certain date.
Referring to internal firm emails at the Senate inquiry into consulting yesterday, Senator Richard Colbeck said exchanges between partners clearly referred to a document.
“The conversation is not about a date. It's about a document,” he said.
“So how do we reconcile that it's just about a date and it's not about having the edge on information on what might be going to happen in Australia so that we can prepare and start marketing this scheme in advance of everyone else?”
Luke Sayers admitted the date was one breach but there were others.
“The date was one breach,” he said. “But it does appear that a number of other instances tax partners that were sitting on government bodies, Treasury bodies, unequivocally did the wrong thing and there was no confidential agreement signed per se, but implicit in the participation of them on that government think tank or body was that they were not to share information from the ongoings of that conversation to others.”
“And clearly, those tax partners did. And that's not acceptable.”
Earlier in the day, current CEO Kevin Burrowes was adamant that the confidentiality breach was limited to the date the revised tax regime would begin and the firm made only two errors.
“In May 2015, the Treasury released that exposure draft which enabled multinational companies to start to think about how to restructure their operations in Australia to meet the requirements of that anti-avoidance legislation,” Mr Burrowes said.
“That exposure draft changed very little between May and December when the legislation was enacted.”
“So the wrongdoing of PwC was two things in connection with this. First of all, there was an unacceptable breach of confidential information about the enaction date.”
“That date had no consequence at all about the structuring advice that was provided I believe, to the clients, because the exposure draft was already there.”
“We helped a small number of clients to structure their operations to meet the requirements.”
“The second thing that we did wrong was that we devised two structures –one structure that we had to unwind because it was unsatisfactory with the ATO.”
In the next session, Mr Sayers said the international tax group within PwC consisted of a small number of partners around the world advising multinationals and there had clearly been wrongdoing.
“That is why the tax partners here in Australia did the wrong thing sharing the information that was going overseas. And so clearly, it is more than a date.
“And I think one of the great things that will come out of this is real clarity for all of the firms – and for legal firms as well – if you are going to participate in government standard setting or think tanks or legislative change or anything like that, it cannot be from the client-facing part of any of the firms because you've got an inherent conflict straight away and that was wrong and the individuals behaved wrongly.”
Senator Colbeck said suggestions that international partners in the firm failed to realise they were discussing a secret document “doesn’t fly”.
“The suggestion that people internationally didn't know that it was confidential doesn't fly given the email addresses – so from somebody in Australia at AsiaPac to the UK, Americas – I mean, the whole conversation was about the fact that this was a confidential document and it was being shared.”
“And yet, we've been told that it's perhaps half-a-dozen people who knew and they're all still in the business, apart from a couple who might have retired, without consequence.
“How do we how do we reconcile what the documents that we're seeing in front show versus what we’re being told that it’s just a date?”
Mr Sayers said his knowledge was restricted to the time he was CEO, which finished in 2020.
Senator Pocock said it happened “under his watch” and asked whether the firm had made inappropriate use of legal professional privilege to conceal tens of thousands of internal documents from the ATO.
“So I think legal professional privilege is a difficult area of the law, Senator. But what I do agree, is that, you know, clearly there was legal professional privilege assigned to certain documents, where it shouldn't have and the processes and the policy within the firm going back to 2016 did not detect that.
“And we worked feverishly with the ATO from 2016 to 2020 to make sure that we had the highest quality standards within the tax business at PwC.”