A Portrait in Cadging: PwC’s grants-for-grants rort, consulting bonanza, even a sweatshop

by | Feb 14, 2022 | Finance & Tax

While they hunt down Robodebt victims for every penny, PwC pays no tax, rakes in billions for consulting to government, quietly runs a sweatshop in Sydney’s West and has even jagged a grant to tell the government who should get grants. Michael West has an answer to lift a pound of flesh from Australia’s biggest leaners.

Even Aldous Huxley and George Orwell, with a jar of LSD, could hardly have brainstormed a future so dystopian as this.

Imagine a country where the government was so captured by large private institutions that it allowed them to pay no tax, slotted them billions of dollars in contracts for telling them how to do government, and now, the succulent cherry on top, a mysterious contract to tell them how to give grants.

Imagine no longer. PwC, the consulting firm behind the federal government’s botched vaccine roll-out – and one of the four most powerful financial firms on the planet – has just been slung a couple of million dollars to preside over government grant applications.

Rarely have rapacious corporate machinations been so exquisitely rewarded. Together with its Big 4 peers – Deloitte, KPMG and EY – PwC has raked in $1.74bn in consulting work in 18 months. That is federal government alone. The states hide it.

Last week’s annual dump of political donations data affirmed them again as some of the biggest bribers of Australia’s major parties. PwC was the biggest, with $155k paid to the Liberal Party, $11k for the Nationals and $80k for Labor.

That’s almost a quarter of a million dollars more than its consulting operation, PricewaterhouseCoopers ASEANZ Consulting, pays in tax; which is, year after year, zero.

When it comes to corporate learners, few play in this elite league. The cheek, the hide of this crew, is veritably clangorous. Mind you, they have competition. Second tier chin-wagger, Boston Consulting, has even been charging us for consulting to consultants.

To be fair to PwC, they are only marginally more voracious than the rest, just a little more accomplished at gaming the Tax Office, the politicians, government departments and the Australian people, than their peers. This is their business model, and they are bloody good at it.

Before we get to this freakish grant-for-giving-grants caper, branded “surge capacity and capability uplift” – and please stick about to read this because it is 24-carat corporate cadging – let’s have a quick run-through their most recent public financial statements just to work out how such a blue-chip mob as this can get away with ripping the taxpayer for such large wads of cash while paying no tax.

Bear in mind that this is the only public vision we get about their financials, as the Big 4 still operate their 18th Century financial structures which conceal everything. “Partnerships” that is.

Partnerships don’t have to disclose their accounts, companies do. In fact, we only get one glimpse per year of their partnerships, just one figure, the top line, and they have been routinely racking up 10% revenue increases; not profit, actual revenue, revenue combined of about $10bn annually.

According to the accounts of its consulting business, PricewaterhouseCoopers ASEANZ Consulting, they pulled in $999m revenue in pandemic year 2020. On that, they paid $13m in tax (after jagging a $5m refund – yes refund – the year before).

The paradox here, and one which enshrines the gullibility of Australian governments, is that they must have paid that smidgeon of tax in some other country because, if you check the Tax Office transparency report, they paid donut in Australia. Same deal in prior years.

Was it their affiliates in Singapore or South-East Asia, Guernsey perhaps, which got them for a few dollars in contributions to society? We don’t know, they don’t have to reveal this, but how do they pull off such a breathtaking feat of corporate leaning while an army of Robodebt battlers are pursued for every last cent?

How the pull it off

They merely rack up as much in costs as they can to charge against revenue. Tax is paid on profits, so they booked $724m in “professional and office service charges” and $143m for “personnel” in that year. Okay, so their people costs are high. Fair enough. That’s what the business is, a bunch of people writing stuff on computers in a swanky office. Indeed their property plant and equipment is valued at just $10m.

Basically, this is just one big “related party transaction”, a tangle of trusts, partnerships and assorted entities from Singapore to Guernsey, charging the government and shuffling money about. Some $750m of that $1bn in top line income is syphoned off to other entities in fees.

And a sweatshop to boot

How can a mob which takes so much from Australia pay so little in return? We are talking all the Big 4 here, not just PwC. They have even been busted running a sweatshop of underpaid auditors in Western Sydney. In a spot of hard-hitting journalism by the AFR: 

“PwC has denied operating a “white-collar sweatshop” where dozens of workers from non-English-speaking backgrounds were underpaid.

In testimony at a Senate inquiry into job security, the firm also denied allegations made in a confidential private hearing of the inquiry on Wednesday morning that most staff at the “skills hub” were required to work more than 80 hours a week …

Besides taking the successful ATO tax transparency reforms further, one answer to make the consultants pay their way would be to say no more government work for any firm with tax haven associates. Another is to put the onus on them to pay tax, not on the Tax Office to chase them for it. A withholding tax on government consulting work that is.

If it’s good enough for tennis players, it ought to be good enough for high-charging finance houses. 

Australia’s international sportspeople (tennis stars tend to favour Bermuda as their residence) and our artists and others are subject to withholding tax. If they earn prize-money here for, say, a tennis tournament, a portion of that income is withheld.

We reckon government contractors should also be subject to a withholding tax – at say 15%.

In this way, it would be incumbent upon the contractor to properly submit their tax returns, like everybody else, and then claim against their tax withheld depending on profit.

For the Australian Tax Office this would mean it would be saved from having to choose who to drag through the courts to enforce compliance with the tax laws.

The RoboGrant scheme

Just to finish on a lighter note – because if you didn’t laugh, you’d cry – a few weeks ago the Department of Industry awarded PwC a $1.9 million contract running from 12 January to 30 June for “surge capacity and capability uplift”.

They tried to hide it but a spokesperson for the department elaborated slightly to InnovationAus on what work PwC might be doing in return for this profit uplift.

The spokesperson would not reveal which programs PwC will be working on as part of the contract, but confirmed it may include the assessing of grant applications.

The program support PwC is providing to the department is of a general nature and is not specific to any one program, or set of programs. PwC contract staff are being engaged to provide general and wide-ranging support functions which may include assessing grant applications,” the spokesperson told InnovationAus.

The Community and Public Sector Union (CPSU) has slammed the outsourcing of core Department work, saying it can and should be done in-house by APS staff.

“This contract looks like yet another example of the Morrison government paying exorbitant rates for consultants to do work that can and should be done by the public service,” CPSU assistant national secretary Michael Tull told InnovationAus.

Hear, hear. This privatisation of government by stealth is not only unnecessary but also costly, with both the cost of government and the cost of consultants never so high. We could call for an inquiry into the Big 4 but we did that, and the result was a 20-page report into the failure of audit which found, despite the evidence, no failure.

Not long after, thanks to a story out of the US, KPMG was sprung for widespread cheating in audit exams. Bear in mind the three business prongs of the Big 4 are consulting, tax advice to corporations and audit.

Yet the gatekeepers of commerce have no gatekeepers themselves. Nobody is guarding the guards, or if they are, they are well and truly sleeping. And when we caught Deloitte exaggerating mining tax and royalties by a cool $45bn to assist the world’s biggest miners in their cry-poor campaign to keep the billions in public subsidies rolling through the gate … crickets.

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences.

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