Michael Pascoe: Waiting for other PwC shoes to drop all over Canberra

The full impact of the PwC scandal is yet to be felt in Canberra,  Michael Pascoe writes.

The full impact of the PwC scandal is yet to be felt in Canberra, Michael Pascoe writes. Photo: TND/Getty

While the hunters are in full tally-ho mode pursuing the PwC fox finally flushed out of the Canberra thicket, there is a whole colony of rabbits quivering in the long grass, awaiting dogs picking up their scent.

To mix my metaphors, there is a footlocker of shoes yet to drop from the PwC scandal – and not on PwC.

There are hobnails due for Treasury, the AFP, the Tax Practitioners Board, the ATO and their political masters. Maybe or maybe not actual elected individuals, but certainly the hive of political advisers and handlers that comprise the modern politician.

And the theatre mounted by Treasury and Finance last week – the shows of outrage and referral to the Australian Federal Police – have been exposed as confected farce. The headline performances have been turned into embarrassments by the ATO.

ATO truth bombs

The ATO dropped bombs in the Tuesday night session of estimates.

Commissioner of Taxation Chris Jordan explained the ATO’s actions on Tuesday night. Photo:

The AFP was consulted by the ATO over Peter Collins’ breach of confidentiality for two years from March 2018 – and the AFP decided it didn’t have enough to launch an investigation. With the effective theft of information from the Commonwealth, Plod plodded nowhere.

The ATO “expressed general concerns” to Treasury in 2018 when asking it for a copy of Peter Collins’ confidentiality agreement – but not for the first time, it seems Treasury is peopled by dolts.

The ATO eventually handed over what it had on PwC and Mr Collins to the TPB in 2020. That’s three years ago now.

Three years of steaming manure in its lap and the considered folk of the TPB in January issued a quiet press release announcing it was sinbinning Peter-John Collins for two years for making “unauthorised disclosures of this confidential law reform information to partners and staff of PwC” and told PwC “to have processes and training in place to ensure conflicts of interest are adequately managed”.

Like being savaged by a dead sheep, as someone once said.

Except that the Australian Financial Review’s Neil Chenoweth was onto the release and knew a hot story when it was smoking.

Then a curious thing happened – a very slow burn. Chenoweth kept at it and PwC received a few mentions elsewhere, but what was clearly a red-hot issue curiously only smouldered until being fanned in Senate Estimates on February 15 and then bursting into public flame last week.

Senate Estimates drama

Back with the hounds, Sherlock Holmes’ dog that didn’t bark came to mind watching Senate Estimates on Tuesday: LNP senators seem to have little interest in matters PwC.

Indeed, after the Tax Commissioner threw his bombs, Liberal Senator Andrew Bragg went to asking questions about franking credits – not that the LNP needs to underline its irrelevance.

Senator Barbara Pocock doggedly pursues in estimates what has happened. Photo:

Not so Labor and Greens, led by Senators Deborah O’Neill and Barbara Pocock respectively.

The former unleashed previously sleepy hounds by tabling the wad of incriminating PwC emails last week, the result of questions on notice she put to the Tax Practitioners Board following the February 15 estimates hearing.

Suddenly, months and years later, Treasury and Finance were shocked, shocked, to find that gambling was going on in here.

No, sorry – that was Captain Renault in Casablanca. Treasury and Finance were shocked, shocked to have their noses rubbed in what the AFR had been writing.

Tardy Treasury response

On Tuesday morning, Senator O’Neill sniffed closer to the rabbits, seeking a timeline from Treasury Secretary Steven Kennedy about when Treasury first became aware there was something rotten in the state of PwC, that information was being stolen from the government, that there was an investigation under way.

Dr Kennedy knew such questions were coming, said as much, had answers carefully prepared, wording delicately weighed, and a deputy-secretary to front the bus for him.

Senator O’Neill ran out of time before exploring in greater tempting detail which tortoise found out what when, but the immediate headline is that Treasury “was requested information” in 2018 about PwC.

That was five years ago.

You might think Treasury’s interest would have been piqued. Nah.

“We left it to the ATO.”

And the ATO has secrecy requirements – “we couldn’t get more detail … we weren’t able to ask”.

Meanwhile, happy relations and big fat contracts with PwC continued.

Secrecy limitations

The ATO itself was smelling a rat much earlier – 2016 – and the rat was the house of PwC in general and, from 2017, Peter Collins in particular.

But, you know, secrecy.

Tax Commissioner Chris Jordan railed in Estimates against the extreme secrecy laws governing the ATO and its legal inability to mount a criminal investigation.

The ATO sought the advice of its general counsel and was told it couldn’t tell anyone about the Peter Collins/PwC outrage other than the AFP.

Mr Jordan said that also turned out to be the advice of the Commonwealth Director of Public Prosecutions and the Australian Government Solicitor.

The ATO “shared its information” with the AFP in 2018 and 2019 until it was decided the AFP didn’t have enough to launch an investigation.

Faking it?

Treasury now referring the matter to the AFP means either Treasury, the AFP or both are faking it for the cameras.

I’d bet they didn’t guess the ATO would drop them in it.

In 2019 the ATO allocated an assistant commissioner and 20 staff to exclusively focus on Peter Collins and PwC.

Over years of legal battles involving what Mr Jordan called “highly ambitious if not false privilege claims”, the ATO scored PwC’s internal emails among “thousands and thousands” of pages of information.

And all the ATO’s legal advice eventually would let it do was hand information over to the TPB in 2020.

Slowly spin the TPB’s wheels – and it is saying nothing further now in response to our questions.

Email trail

According to the ATO, the TPB seemed to acquire more “interesting” PwC emails as there were emails tabled last week that the ATO did not have.

Senator Deborah O’Neill probes government employees about emails on Tuesday. Photo: AAP

And Senator O’Neill tabled more emails on Tuesday. A particularly rich one sent from Peter Collins’ phone in September 2015 includes what looks like an automatic top-and-tail notice:

“This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding US federal, state, or local tax penalties.”

But for avoiding Australian tax, hey, go nuts!

It says in part: “Little real chance of anti hybrid rule anytime soon. I spent 3 payneful (sic) hours today. BoT (Board of Taxation) has zero idea. The only thing they get (now) is that it is complicated and perhaps we should not rush. No need to share this because all supposed to be secret.”

The email concerns an entity domiciled in the British Virgin Islands – the Caribbean tax haven. Mr Collins tells the recipient “The imported mismatch formulas will blow our mind but be easy to sidestep.”

And that’s why top tax partners get the big money.

The proforma “not for avoiding US tax” sentence is ripe but not the cutest in Tuesday’s tabled emails.

That title goes to a line Senator Pocock seized on: “OK in practice until the ATO gets grumpy and figures out the joke.”

But no hurry, it seems.

The drowsy nature of Treasury is now aided by not answering questions thanks to the easy excuse of “not wanting to prejudice” the AFP investigation. Convenient for all parties, that.

Nothing to declare

A Treasury official did not know if anyone had told the Treasurer of the day anything about anything.

Of course, there are layers between public servants and their minister.

What an extraordinary thing in a hothouse like Canberra if nobody told anybody nuffink.

Meanwhile, I’m guessing the AFP didn’t have the talent to go further with the information provided by the ATO.

Plod would have had to hire a Big Four consultancy to explain it to them, probably PwC – and it couldn’t do that. Heck, it was already employing PwC.

And for all its umbrage and bristling on Tuesday night about its lack of powers to deal with this scandal, the ATO’s failure was exposed by Senator Pocock when she asked what the ATO had done about that lack of power, what representations had it made to the Treasurer to obtain suitable powers?

The answer was that the ATO had not tried.

As Senator Barbara Pocock summarised, there’s a powerful case for the referral of this entire case to the NACC.

And there’s more …

P.S. Late on Tuesday night the AFP tossed a bunger back at the ATO bomb throwers, suggesting the ATO had only provided “a set of representative sample documents”.
The AFP statement in full:
  • In 2018, the Australian Taxation Office (ATO) requested advice from the AFP in relation to the potential misuse of government information by PricewaterhouseCoopers (PwC)
  • The ATO sought advice on whether there was sufficient information to make a formal referral of the matter to the AFP for investigation
  • A set of representative sample documents were provided to the AFP. The AFP assessed, based on the material that the ATO provided, was that there was insufficient information in the material, to support a formal referral
  • In consultation and agreement with the ATO, the matter was closed in 2019
  • On Wednesday, May 24, 2023, a report of crime was provided to the AFP relating to this matter for the first time
  • An investigation is under way and no further comment will be made.
Topics: AFP, ATO
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