The double standard is glaring, further illuminated by the findings of the Robodebt Royal Commission. While the AFP dithered for years investigating the blue-chippers from PwC for selling state secrets to foreign corporations, it was as quick as a rat up a drainpipe when it came to sending out letters to Centrelink clients threatening them with prison sentences unless they paid their Robodebts. Michael West reports.
This strike on Australia’s most vulnerable – the Robodebt scheme targeted 381,000 people to unlawfully recover more than $750m – was badged “Taskforce Integrity”.
So we are conducting a “Taskforce Integrity” of our own today, perusing PwC’s only significant public financial disclosure and finding an inevitable morass of related party transactions – a global maze of partnerships, trusts and tax haven entities designed to skive out of paying tax on a billion dollars in revenue.
A good deal of this is revenue from the Australian government we can surmise. As the Senate Inquiry into the Big 4 consulting players has ably revealed, the obscure partnership structures of PwC and the other Big 4 enable them to hide a lot of things (including even how and where they make all this money).
In fact, as partnerships, their single duty of disclosure is the Orwellian-named “Transparency Report” issued once a year in which they are compelled merely to reveal one actual number, their top-line revenue. You will find this actual number interred within the glossy revelations of outstanding ESG initiatives, the smiling faces, the net zero talk and the marketing gumph about the firms’ amazing contributions to society.
And for the past few years, as the Australian Public Service has been gutted in favour of high-priced consultants. EY, Deloitte, KPMG and PwC have been coolly notching up double digit rises in revenue growth – not profit, but yes, revenue.
Who else does this routinely in a 1pc interest rate environment while the broader economy is growing at 3%? Only the maestros of preying on insipid governments.
The rise of the paper-shufflers
Unlike its Big 4 confrères however, the PwC partnership controls an actual company of size. It is called PricewaterhouseCoopers ASEANZ Consulting Pty Limited and is required to publish with ASIC its annual financial report.
In this document we find that consulting revenues last year rose again, up from from $944m to $1.15bn. Bear in mind that this probably includes income from New Zealand and other countries in South East Asia, also that it comprises non-government consulting work too.
They don’t have to disclose it. But what we do know is that PwC Australia, the partnership which controls this large consulting operation, recorded a glitzy 17% rise in revenue to $3b last year. We also know that Australia has one of the most over-consulted governments in the world and that Federal government consulting revenue alone was probably north of $300m.
A cake of tax refunds and an icing of government grants
In any case, they pay almost no tax, as expected. How do they do it? They wiped out that $1.2b in consulting fees by charging the company $851m in professional expenses. It’s darn professional alright. The notes to the accounts show related party loans from PwC entities offshore, arrangements with tax haven entities in Singapore, Guernsey and The Netherlands. They even show PwC got government grants, yes grants on top of the lavish consulting contracts.
There is no information about these grants but the irony is clear: the government has been slotting Australia’s most wealthy institutions with grants of public money while threatening to cart its poorest citizens off to prison if they don’t pay their unlawful Robodebts.
It appears that PricewaterhouseCoopers ASEANZ Consulting is used by the PwC Australia partnership to lump its expenses into – expenses for the company, profits for the partnership.
Senate report is out: is the “multi-year cover-up” “game over for PwC”, or not?
Indeed the company makes losses, as it is supposed to, because if you make a loss you don’t pay tax. So the loss last year was $2m and the year before $18m. Accordingly, they were able to book an income tax recovery (yes, not expense like the rest of us, but recovery) last year of $502,000.
They picked up a $9m tax refund in 2021. That’s nice work, especially as they racked up government grants of $537k and $4.7m over the past two years.
Allegro: more allegretto than adagio
Things won’t be so rosy this year as the PwC scandal has take its toll. Under pressure from their foreign overlords to rescue the global PwC brand, the partners have had the cut off the rotten branch from the tree, selling the $300m federal consulting income stream to some private equity vultures called Allegro.
They have taken quite a hit for the Big 4 team and have been savagely chastened in reputation terms. It has come at quite a cost for the good people at PwC, and there are many, who may have to downgrade expectations from Mazeratis to Mazdas.
Yet the problem for policy makers is unlikely to be solved any time soon as there is too much money at stake in Big 4 paper shuffling for gullible governments. The problem is conflicts of interest between their audit, tax and consulting divisions.
They have grown spectacularly *because* of these conflicts; that is, they have capitalised on their knowledge, connections and venerable reputations as the Gatekeepers of Commerce (from their origins as company auditors) to expand into advising governments about everything and advising multinationals on how to dodge tax.
Busting them up is the only solution to these issues (for financial markets, the conflicts of interest are just as untenable between the tax and audit divisions as the auditors are there to sign off the accounts as “true and fair” while the tax advisers are there to advise corporations on how to most aggressively duck paying tax in Australia while avoiding investigation by the Tax Office.
Sadly, Big 4 political donations, and their sheer size and lobbying muscle, stands in the way of any significant reform to these egregious conflicts of interest.
Anatomy of a Cover-Up: whistleblower warned PwC and Lendlease of $1b tax scam
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.