The ‘dirty 34’ and PwC’s global tax dodge

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The inner workings of one of the most secretive and powerful consulting firms in the world, PwC, has been laid bare in a document made public last week, revealing the firm’s brazen attempt to use confidential government tax plans to cultivate fresh business from notorious corporate tax avoiders, including a group dubbed the “dirty 34”.

PwC’s woes lurched to a new low when a Senate inquiry released the 148-page document which detailed the evidence that the Tax Practitioners Board (TPB) used to ban former PwC tax partner Peter Collins for breaching a confidentiality order with Treasury.

PwC Australia is in the spotlight after a 148-page document detailed how its partners marketed confidential government information to clients. Credit: Getty

The document, which comprises internal company emails, showed Collins repeatedly leaked confidential information with senior PwC staff about government plans to combat tax avoidance over three years, for PwC’s benefit. The information spearheaded a push for new business, including the Silicon Valley-based US tech giants and a group dubbed the “dirty 34”.

“Agree there is an opportunity to own this space because my sense is that we are ahead of the curve,” Collins wrote in an email to colleagues in September 2015. “Have you convinced yourself there is a problem outside of the dirty 34?”

The “dirty” term originated more than a decade ago with the “dirty 30” listed by the US Public Interest Research Group as the largest tax avoiders in the US, including global names such as Boeing and GE.

The Australian Taxation Office (ATO) also had its own “dirty 30”, which Collins and PwC were also targeting. Collins mentioned this in an email dealing with speculation that legislative changes might be delayed for this group of troublesome taxpayers.

Former PwC partner Peter Collins has been banned as a tax practitioner.

“Treasury was crystal clear on this and the politics of delaying the rule for the dirty 30 seems impossible. There is no sympathy for this group in Treasury or govt or the ATO,” Collins wrote in the email.

He saw an opportunity to use the confidential information as a way to market PwC as a solution to its ATO problem.

“Controversy treasure trove of [sic] we can land a few of these.”

The “dirty 30” were topical at the time. Then-treasurer Joe Hockey had attended a PwC tax forum in Melbourne months earlier, in July 2015, and talked about some notorious tax structures being utilised in havens such as Ireland and the Netherlands.

“I make no apologies for going after 30 multinationals that are particularly engaging in the double Irish Dutch sandwich,” Hockey said before deftly adding, “which I would hope you’re not familiar with at PwC.”

PwC’s managing partner of tax and legal at the time, Tom Seymour, jumped in: “We thought it was something you got for lunch.”

Seymour, now the head of PwC’s Australian operations is taking a less flippant approach now. On Friday, he admitted he was one of the partners who received this information and announced that there will be an independent review of PwC’s governance, culture and accountability.

“There were a number of partners who were in senior roles or remain in senior roles within our firm who were the recipients of emails which highlighted for example the marketing approach and financial success of the tax advice. I am one of these partners. While these emails did not contain breaches of confidentiality, they do demonstrate evidence of the cultural problem at the time,” he said.

Senator Deborah O’Neill says the Australian people were the victims of the leaks.Credit: Anna Kucera

He also reviewed his earlier statements that played down the seriousness of the leak.

“I have reflected on the previous communications I have provided to you on the TPB matter and on reflection these have been technical and legalistic in nature. I have not addressed the broader cultural issues. This cultural issue is reflected in the emails that were provided to the TPB,” he told the PwC partners.

“It is important that I and other senior leaders at the time that these issues occurred take accountability for what has transpired.”

Seymour was still head of PwC’s tax practice in Australia at that time. He has not been implicated in any wrongdoing, but the TPB document was littered with references making it clear that many within PwC were well aware confidential information was being used to market tax structures to avoid Hockey’s tax push.

“As per my other email this draft was provided to me on a strictly confidential basis,” said an email from a PwC employee out of Sydney.

The following year, just ahead of anti-avoidance measures under the Multinational Anti-Avoidance Law being introduced, a PwC partner was crowing about the company’s success at attracting what were described as “brand-defining” clients.

The email said: “We were aggressive in telling these relationships they needed to act early (heavily helped by the accuracy of the intelligence that Peter Collins was able to supply us … We were first to them with innovative approaches to the problem [redacted] was critical in stimulating their thinking and presenting ideas no one else had, especially in relation to the first draft of the law).”

PwC has desperately sought to play down the matter, with hundreds of millions of dollars worth of federal government business now at risk as the major political parties contemplate steps that could include the company being banned from bidding for government business.

When news broke in January that Collins, a PwC tax partner, had been banned by the TPB for leaking of secret information about Australian government plans to combat corporate tax avoidance to his colleagues, the firm was quick to play down the seriousness of the issue.

Treasurer Jim Chalmers says further action will be taken against PwC if necessary.Credit: Alex Ellinghausen

In a statement, PwC acknowledged a single confidentiality breach by Collins relating to a consultation process in 2014.

PwC staff said the information was shared with a “small group” of colleagues, and the investigation did not find that any client arrangements or structures were impacted.

The document released last week shows PwC partners set a breakneck pace in leveraging this information for its own gain before the laws were implemented. The emails show PwC utilised staff in offices as far afield as London, Dublin, Singapore, New York and the Netherlands.

One email from 2015 cites a range of industries that “might have problems”, including tech companies, online retailers, insurers, telcos, fund managers and commodity traders.

“So the field is large, and time is short.”

An earlier email from a PwC executive mentions an unnamed US tech company: “one of the hottest tech stocks around” at the time.

“As you know, Australia is at the forefront of attacking BEPS [base erosion and profit shifting] and seems to have a particular affection for US companies! Do you know if we have any relationship with them in the US? They can expect a [redacted] style ATO review down here and we would like to reach out to them.”

While PwC’s sponsorship of a $5000-a-head post budget dinner is going ahead on Tuesday, Treasurer Jim Chalmers has flagged further action that could imperil the hundreds of millions of dollars in fees PwC receives from government contracts.

“I’ve indicated to the Treasury and to the regulators if there are more steps that are necessary, I’m prepared to take them,” Chalmers said at a press conference on Thursday.

Labor senator Deborah O’Neill, who chairs the Corporations and Financial Services Committee, emphasised the impact on all Australians.

“The fact that the ATO very quickly twigged, and interrupted the practice is a credit to the ATO, but this was constructed with a victim in mind,” she said.

“The victim was the Australian people, and everyone who relies on hospital services at the NDIS, a pension … we are the victims of what PwC, Mr Collins in particular, was attempting to construct here.”

It is a point not lost on PwC. In an email chain as part of the 148-page document, was an opinion article written by PwC to be offered to Australia’s major newspapers, including this masthead.

“Whilst no one likes paying tax, the reality is, our taxes fund the high standard of living we enjoy here in Australia. Taxes fund our roads, schools, health and welfare systems,” the opinion piece says.

“The panacea is getting the balance right between creating a tax system that is sustainable and sets Australia up for future growth and prosperity. Whilst taking care of the most vulnerable members of our society.”

The piece was also designed to serve PwC’s interests, the email made clear.

“We need to emphasise that coy [company] tax change is not a panacea to [sic] facing all issues,” it said.

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