“Eye-watering”, “fines jump 10,000% in huge crackdown”! The Big 4 crackdown has arrived in the most cracking down fashion. But what is it really? Michael West reports.
Just one day ahead of a Four Corners exposé on the Big Four – something the ABC could have done eight years ago when the story was plonked in front of them by yours truly – the government has announced a crackdown. Make that a trumpets, lights, red-letter CRACKDOWN!!!
Crackdowns have played a crucial role in government media relations for decades now; to such an extent in fact that, back in the day, we banned the use of the very word crackdown in press coverage at Fairfax because some regulator or other would issue a crackdown media release, the journalists would faithfully unfurl crackdown stories and that was often the last we heard of it.
They moved fleetingly to “clamp-downs”, which we quickly proscribed as well. But they’re back!
When it comes to crackdowns, there is a deep schism between image and substance, between rhetoric and reality. And this one will be no different because it utterly fails to address the roots of the problem.
What did they miss?
Did they ban political donations by the Big 4 – PwC, Deloitte, KPMG and EY? No. Did they compel them to register as lobbyists? No. Did they impose gaol sentences for fraud? No. Did they impose criminal penalties? No, only civil. Did they stop the procuring of government work while the Big 4 work against the interest of governments for their multinational clients? No. Did they move to bust them up to address the ultimate issue, conflicts of interest? No.
What did they do about tax secrecy, transparency? They say they’ll do something. That remains to be seen.
To be fair to Treasurer Jim Chalmers and co, they have moved decisively and loudly to respond to the debacle which is PwC and dodgy consultants. Dropping their crackdown news yesterday evening it got full-court press today, and this action will arrest decline for a while:
“Tax fines jump 10,000% in huge crackdown,” roared News.com.au and the News Corp tabloids. “Eye-watering”, it was, they said. SMH, Age, The Guardian, AFR – they all ran their big crackdown stories. Meanwhile, another day, another scandal. Besides its crackdown yarn, The Australian carried “KPMG ‘billed Defence for hours not worked”:
“Whistleblowers allege KPMG over-billed and incorrectly charged Defence, reportedly wasting ‘significant’ public funds on contracts that were extended with ‘little or no scrutiny’. SUBSCRIBE to read the full story.”
Conflicts of interest remain, system change required
But what is it really?
“The Albanese Government will oversee the biggest crackdown on tax adviser misconduct in Australian history,” ran the official announcement. “The PwC scandal exposed severe shortcomings in our regulatory frameworks that were largely ignored by the Coalition, and today we’re taking significant steps to clean up the mess.”
“We’re cracking down on misconduct to rebuild people’s faith in the systems and structures that keep our tax system and capital markets strong. We’re also cracking down on the scourge of multinational tax avoidance and making sure multinationals pay their fair share of tax in Australia.”
That’s the top of the multi-ministry press release. Peeling back the rhetoric, there are a series of reviews coming from Treasury, Finance and the AG’s department, none of which foreshadows action over the ultimate issue: conflicts of interest between audit, tax and consulting divisions of the Big 4 – that is, these gargantuan and dazzlingly profitable firms being both poachers and gamekeepers, both refs and players.
How can you give governments advice on cracking down on corporate tax avoidance while you are giving advice to multinational corporations on how to dodge that very tax? How can you audit their financial accounts as “true and fair” while advising these clients on aggressive tax avoidance strategies?
“Dodgy firms and advisers facing huge fines following government crackdown on tax adviser misconduct,” was the headline from the ABC: “That’s a 100-fold (or 10,000 per cent) increase from the current penalty of $7.8m.”
And so the Big 4 and their multitude of advisers will now respond by lobbying to protect their patch, consulting to every consulting review, earnestly co-operating while diminishing the potency of any threat to their revenues.
There are modest legislative measures:
Good to see a criminal referral. PwC busted for flogging state secrets on how to avoid tax to its multinational clients while advising Treasury on how to crack down on the very same abuses, is high treason but also, arguably, comfortably defensible if the Commonwealth DPP were ever to lay charges.
The TPB measures are good, but “action” on procurement frameworks in the wake of what is likely to be a Switkowski whitewash is likely to fall into the “all talk and no action” basket.
So debilitated, so gutted is government by outsourcing to consultants, they can barely wipe their bottoms without sign-off and “independent expert” advice from the Big 4. Will this change?
There will be more restraint now. Greater vigilance. That is positive. And to be fair to the politicians, the Parliamentary inquiry into consultants and the PwC scandal was robust and covered the vital issues of secrecy, conflicts of interest and rubber-stamping.
Yet, unless the underlying issues of conflicts of interest are addressed, systemic change that is, busting up the Big 4 along audit, tax and consulting lines, this crackdown will go down in history as just another crackdown.
This was the first story we published, now 8 years old, as an independent media operation. The message remains the same.
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.