PwC Australia exited eight partners in its latest move to safeguard the consulting company’s reputation entangled in a tax scandal.
On July 3, PricewaterhouseCoopers Australia announced it exited eight partners for “professional or governance breaches.” The eight partners have left or are in the process of leaving the company.
It is the latest announcement in a series of actions that PwC Australia has taken trying to damage control the company’s reputation entangled in a tax scandal with the Australian government since the beginning of the year.
PwC previously helped the federal government design tougher international tax laws. But at the same time, it would have advised overseas firms on the tax arrangements.
After an internal investigation, the company stated it “identified a number of specific examples where professional standards were breached with respect to misuse of confidential information or other matters reviewed by the ATO [Australian Tax Office]” added to “failure of leadership and governance to adequately address the matters.”
At the end of May, PwC directed nine partners with “leadership or governance roles” to go on leave pending the outcome of their internal investigation.
PwC has now named the people involved and Tom Seymour is one of the eight partners exiting the company. He is the former chief executive officer of PwC Australia and resigned in May after admitting he had received emails containing confidential information about the government’s tax plans.
As announced last week, Kevin Burrowes, the Global Clients and Industries Leader based in Singapore, will relocate and take over as the new chief executive in Australia. PwC Global is perceived as seizing control of the Australian operation with the move while it’s still unsure how the scandal will affect the company globally.
For PwC Australia, the goal of the changes is “to take accountability, reshape the firm’s culture, and most importantly, re-earn trust with its stakeholders.”
Last week, an anonymous group of PwC Australia partners raised doubts about the independence of the internal investigations designed to identify those directly involved in the tax scandal with the “newer, and less senior, partners, bearing the brunt of the scandal.”
The eight departures are in addition to four former partners who already left for being involved in confidentiality leaks.
The scandal forces the firm to sell the government advisory work, at both the state and federal levels, accounting for about 20 percent of the firm’s revenue in Australia. About 1,750 employees and 130 partners work in the government consulting business, which generates about 600 million Australian dollars in annual revenue.
PwC could unlikely win new contracts with federal and state governments with the scandal.
On June 25, PwC Australia announced it had entered into an exclusivity agreement to divest its federal and state government business to private equity investor Allegro Funds for one Australian dollar. Both parties are targeting signing a binding agreement by the end of July.
PwC is subject to multiple investigations, including a criminal probe.
In 2015, the former international tax chief at the Australian affiliate Peter Collins was helping the federal government design tougher international tax laws. The government was working on stopping companies from avoiding taxes by transferring profits multiple times from one structure abroad to another and ultimately to a tax haven.
Despite confidentiality agreements, the former international tax chief shared confidential information and documents obtained through government contracts to PwC staff both in Australia and abroad.
In January, the Australian Financial Review revealed that Mr. Collins was deregistered by the Tax Practitioners Board late last year after an investigation found he shared confidential information and documentation obtained from consultations with Treasury.
In 2016, the Australian Taxation Office was already concerned that a few multinational companies “suspiciously and quickly” sought to restructure operations in response to new tax avoidance rules.
But PwC argues the clients were not involved in any wrongdoing and no confidential information was used to enable clients to pay less tax.
The scandal also raises concerns about the conflicts of interest between auditors, accountants and consultants, and whether one company can work across all areas, as PwC and other major accountancy groups do.
