The Australian Taxation Office would have referred the PwC tax policy confidentiality breach to the tax agent regulator earlier had it better understood the possible impact of the publicity that followed.
Deputy commissioner Jeremy Hirschhorn told the parliamentary joint committee on corporations and financial services that the ATO saw the matter involving PwC and its former partner Peter Collins as a routine disciplinary matter unlikely to get much coverage.
Hirschhorn said other licensing decisions and issues related to promoter penalties against individuals or firms tended to receive little publicity on their announcement and no continuing coverage.
The breach of the confidentiality agreement by Collins that resulted in the termination of his tax agent registration and an order against his former firm was different.
A TPB media release resulted in more than 12 months of continuing coverage, two specific senate committee inquiries, an international and domestic investigation by the Australian Federal Police and a further nine cases investigated by the Tax Practitioners Board.
The firm was also disciplined recently for its failure to report the TPB investigation’s commencement and outcome to the strict accounting firm regulator, the US-based Public Company Accounting Oversight Board.
“We fundamentally underestimated the impact of the publicisation of a licensing decision,” Hirschhorn said.
“If we had understood what dramatic impact the publicising result would have I think we would have seen it as a more important remedy against the behaviour of PwC.”
Hirschhorn said the tax office may have proceeded more quickly through the different stages had it seen the TPB penalty as sending a more impactful message to the marketplace.
The ATO’s reflection on how it might have referred the matter more quickly to the TPB was also accompanied by further statements by Hirschhorn related to his engagement with PwC while Luke Sayers was its chief executive officer.
Sayers served in the top role at PwC from 2012 to 2020. Hirschhorn met with Sayers to discuss a range of concerns the tax office had with the firm’s tax division on August 29, 2019, and then on February 20, 2020.
It was at the second of these meetings, according to an ATO timeline of the PwC saga, that Sayers raised the matter of the PwC chief executive officer election, given Tom Seymour was then the partner overseeing the tax group was a candidate.
Hirschhorn told Sayers during the February 2020 meeting that it was inappropriate for the ATO to comment on the management selection processes of accounting firms but that the PwC board should be aware of the ATO’s concerns about the conduct of the firm’s tax group.
The ATO second commissioner told the committee this week that one thing he would change if he could turn back time would be to also have a meeting with the PwC governance board.
“I would have hoped that a body that described itself as a governance board would have taken things more seriously,” Hirschhorn said.
“And — as I understand it — the chair of that board had a role in the CEO appointment process.”
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