Barbara Pocock (SA, Australian Greens) Share this | Hansard source

I rise to speak to the Treasury Laws Amendment (2023 Measures No. 1) Bill. This bill represents an opportunity to respond to the PwC tax scandal; to pick up and respond to the public's and the Senate's outrage about what PwC has done and make sure it never happens again.

In recent months, the government have made their anger at the actions of PwC clear and foreshadowed their ambition to clean up consulting. In August, the Labor government announced it would oversee 'the biggest crackdown on tax adviser misconduct in Australian history'. Some steps are underway to break down the secrecy that stands in the way of a really good investigation and to increase penalties for tax misdemeanours. However, we need much more, and this is a start. We need to see stronger action across a broader range of measures.

We've worked with the government to ensure that this bill, with our amendment, will take the first legislative step towards reining in the power of the big firms and shaping our tax advisory structures in Australia to serve our purposes better. It takes a first and significant step to remove the vested interests of big consulting firms from the very board, the Tax Practitioners Board, that regulates their tax business. Our amendment will prohibit members with financial interests in big tax firms from being on the TPB. Once this amendment passes, board appointments to the Tax Practitioners Board can no longer be current partners or previous partners who are receiving payments from a partnership in bigger firms with more than a hundred employees. Without this amendment, regulators can have direct vested interests in those entities they're meant to be regulating. That doesn't pass the pub test and, unsurprisingly, it doesn't work. It's astonishing that it's been allowed to go on for so long. This is a straightforward and much-needed change which will strengthen the impartiality of the TPB and its ability to regulate tax agents, without any perceived or actual conflicts of interest.

I'd like to thank the Assistant Treasurer and Minister for Financial Services, the Hon. Stephen Jones, and his staff for working constructively with us on this amendment and for working towards cracking down on the conflict of interest and improving the independence of the TPB. The Greens have pursued this issue because the public asked us to do it. People across the political spectrum are united in their horror of what they have learned about PwC and big consultants more broadly over the last year. I've had hundreds of emails and calls, none in support of PwC—not one. If my mailbox is any indication, this organisation has few friends, and Australians are angry. They want action, accountability and honesty.

The amendments we introduced to this bill are a first step, but rest assured there's more to come. The scale of the consulting scandal needs to be met with a commensurate scale of reform. The outrage of the Australian community deserves to be met with an ambitious response. We need to make sure that the unethical behaviour of big consultancies assisting multinational firms to avoid tax, and the extraordinary farming of the public dollar to line their pockets, cannot be allowed to continue. We must rebuild the public sector and put the interest of the public at the core of public spending.

The PwC scandal revealed the partners signed confidentiality agreements as they advised government and then went to work to aggressively and unlawfully sell information they harvested, earning at least $2.5 million in fees and growing their client list internationally. It's a scandal. Its origin and dimensions have come to light through the honesty and courage of insiders along with the work of smart, alert journalists and the efforts and persistence of this Senate, an active Senate. The PwC scandal unfolded over many years. Our regulatory machinery—the ATO, the Tax Practitioners Board, Treasury—did not have the tools and, some say, perhaps the vigour to catch unethical behaviour in a timely way. Our institutions, their regulation, their penalties, are not fit for purpose. The fox cleaned up the henhouse and took the profit home for years.

After hiding behind trumped-up legal professional privilege for years, the leadership of PwC failed to deal transparently with this scandal. At first they called it an administrative issue, and then they adopted what's widely perceived as a fall-guy strategy, seeing one of the partners, Mr Peter Collins, off as a sacrificial lamb when much evidence points to the sizeable number of PwC partners and personnel who shared confidential information and monetised it in Australia and globally. PwC have conducted multiple internal investigations, including the Switkowski review, the Linklaters review, the Allens review, the Mallesons review. Only one of those reviews has been made public; the rest remain a mystery. Self-regulation and secrecy remains their preference. PwC has relied on these reviews to give most of their partners in Australia and all of those in the rest of the world a clean bill of health regarding the tax leak scandal.

Nonetheless, the Senate, through its committees, has persisted. With the assistance of skilled journalists and whistleblowers and insiders from across the community—lawyers, big four staff and partners, contractors, consultants, employees, public servants—we have persisted with their assistance. We have persisted united across the parties in this place against the automatic, vigorous, protective, legalistic and administrative playbook reflexes of partners and CEOs in big consulting firms, those who find the power of Senate questions and of written questions on notice, protected as they are by parliamentary privilege, inconvenient. They contest and they resist them even as I speak today. However, the Australian people are watching. They will not see their Senate held in contempt. They will not tolerate their senators being picked off, pressured, briefed against, divided, intimidated or held in contempt. They will not tolerate the misleading of the Senate.

The protections provided by the parliament against threat and intimidation for witnesses and senators have been essential to our work to ensure we are protected from threat and intimidation and allowed to get on with the task that we have been elected to do—to investigate a massive failure in PwC affecting the public purse and so many individuals, not least thousands of employees and partners across the big consultancies, many of them innocent of any tax related confidentiality breach. Old habits in big entities die hard. They resist and push back. However, our work in the Senate is the only reason that this action is now being taken. Apologies and promises of making good and cooperation with the Senate take more than words. They are reflected in deeds and in the way you behave. Recourse to threat and intimidation, a failure to be transparent or honest, or a reflexive retreat into legal or administrative tactics to old habits are not evidence of good faith. They're not evidence of a changed culture.

And what of those who work for big consultants? We have seen powerful light shed on the conditions of working life within the big four through the Switkowski report on PwC and Elizabeth Broderick's meticulous review of life inside EY. The dominance of partnership structures driven by a focus on revenue and a whatever-it-takes approach to earning it have resulted in unsafe environments where unethical behaviour has fallen at the first hurdle and where speaking up has met with a punitive response too many times. The experiences of racism and sexual harassment and the impact of long hours documented in EY, for example, have cast a long shadow over many employees and their families. While big consultants like EY, PwC, Deloitte and KPMG have promised a new age of a speak-up culture and of ethical practice, I am concerned about what I'm hearing right now about some of the ways in which job losses are being experienced across the big four and the ways in which they're being implemented.

It is vital that any such job losses are implemented through proper processes using clear and transparent criteria, criteria that are open and fair and do not especially target, for example, those who speak up, those who have spoken up, people with health issues, those on parental leave or disproportionately hit those of diverse cultural backgrounds or women. How these decisions are being made is of interest to those of us in the Senate and more broadly in our community, who hold concerns about leadership promises made by big consultancies to the Senate, promises of new cultures, of fair, ethical leadership and management. It takes more than words. It's also what we do and how we do it.

Through these recent events, our tax regulatory system has shown itself inadequate in the face of wily, unethical players who chase money at any cost. The organisations responsible for raising this scandal and investigating it, the ATB and the TPB, did not communicate with each other effectively or alert other relevant agencies. Despite the ATO and TPB being aware of Peter Collins breaching a confidentiality agreement, Treasury continued to sign confidentiality agreements with him. We need to renovate these structures. After years in which this behaviour unfolded without penalty or action, finally the TPB investigated Peter Collins and PwC. However, their two-year suspension of Collin's tax licence and no penalty so far for PwC the entity or many others within PwC who shared confidential information was completely inadequate. When the ATO found serious wrongdoing on the part of PwC and their enormous use of professional legal privilege in an attempt to cover their tracks, the ATO negotiated a confidentiality agreement that cut the penalty to slightly more than half the original amount of $1.4 million, saving them a tidy $758,000. The TPB's response to PwC the entity represents no more than a slap on the wrist. The TPB should have done more. It should have investigated PwC more broadly, and we are awaiting further investigations as I speak.

When our regulators fail to properly uncover and condemn actions like we have seen and take action which is modest or halved in the case of fines, they send a message. They send a message to big players in the tax advisory business and consultancy that they have friends in high places, that they might escape with just a slap on the wrist. The Australian public know this is not good enough. That's why they're so angry and they're looking for stronger action. Our regulatory system has been ineffective because elements of it are captured and too often influenced by particular interests inside the big four, who exercise way too much effect. The fox has long been in the henhouse, setting its culture, convivially regulating itself and its cosy fraternity.

At the time of the PwC scandal, 43 per cent of members of the Tax Practitioners Board were current or former big four partners, including two former PwC partners who were receiving ongoing financial payments from PwC. When the scandal broke, these partners recused themselves from the specific board meetings that considered the PwC issue. However, their presence in the organisation gives rise to perceptions of conflicts of interest, and they should not have been at this table. The TPB is the board that's responsible for regulating tax agents and responsible for investigating elements of the PwC scandal. If you are responsible for regulating tax agents but have financial ties to those same tax agents, there is a significant and insurmountable conflict of interest. This is a text bookcase of regulatory capture. It should not be a feature of our tax system. It should not be a feature of any element of a robust democracy, and it must be eliminated in Australia.

Our amendments aim to address this issue and this particular problem. Through this work and this amendment, we've fixed the loophole that allows big consultants to regulate themselves, taking an important step in safeguarding tax revenue from the hungry profiteers of the big four consultancies. We thank the government and we thank Minister Jones and his staff for the work that has been undertaken to bring this to us today. We look forward to more work and more consultation into the future to fix the many other challenges. This amendment and some of the key steps in this bill will go some way, a short way of a longer distance we need to travel, to restore Australia's confidence in our tax regulatory system. We have plenty more miles to travel to fix other significant problems that continue to afflict the large consultancies in this country.