The problem with PWC and the Big 4 : Treason is the business model

Investigative journalist Michael West writes (Michael West Media 1 June 2023) about how the scandal surrounding PwC is not one off, but part of systemic problem involving al the 4 big American finance advisory multinationals. All have been acting as the middleman between the Australian government and big corporations. All have been advising their clients how to avoid paying tax, while securing generous government contracts. They stand above the law, betray Australia, and pose the challenge on how o deal with them. Michael West is a former journalist and editor with Fairfax newspapers, and columnist for News Corp.

It’s all in plain sight. You can find this on the internet. “Let’s talk” it says at the end of the missive, displaying the contact details of PwC’s International Tax Partners in the US and Australia, including Peter Collins, the man at the centre of the scandal, the man the other partners tried to scapegoat as the rogue culprit who was entirely at fault for the whole caper.

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It has been fascinating to watch the PwC scandal evolve. It began with a leak from an obscure little industry body most people had never heard of, the Tax Practitioners Board, which disclosed PwC partner Peter Collins had copped a 2-year ban for acting as a tax practitioner. That went public, and snowballed spectacularly.

PwC chief executive Tom Seymour was the next casualty, shot by the partnership after declaring at a conference that the leaks were the work of just one rogue partner Peter Collins. The problem with Seymour’s PR strategy was that a trove of emails shortly emerged showing dozens of partners were in on the rort.

The cover-up proved more deadly than the crime; it was fuel to the fire of suspicions over Big 4 conflicts of interest which had been smoking for years. And now the rolling revelations from the Senate Inquiry into Consultants.

Forest for the trees

Peeling back these trees to behold the forest of Big 4 conflicts however and the problems are deeper, more systemic, more shocking than this inquiry alone can plumb.

The entire business model of the Big 4 is predicated on financial treason. PwC, EY, KPMG and Deloitte actively and deliberately prey on the Australian government to deliver profits for their foreign multinational clients.

That is, they advise their multinational clients such as Google, Exxon, Chevron or Vodafone on how best to siphon profits from their Australian business to their related companies overseas with minimal “leakage” of tax to the Australian Tax Office. In so doing, they are deliberately starving the public purse of money to fund hospitals, roads, police, schools, nursing homes, the army … everything.

How did it get to this? The Big 4 began quaintly as audit companies, but were able to frame themselves as the “Gatekeepers of Commerce” by auditing the financial statements of the largest companies in the world. That delivered them credibility, and inside knowledge. Then they morphed.

This was the first story we published as an independent media practitioner 7 years ago, Oligarchs of the Treasure Islands, which set out clearly – with on-record quotes from former PwC tax partner George Rozvany – exactly what was going on.

“The Big Four have, under a Rasputin-like cloak of illusion strayed from their original and critical role of verifying the accuracy of financial accounts for all stakeholders, to be “accountants of fortune” merely representing the accounting position for multinationals and developing aggressive international tax avoidance practices,” said Rozvany.

Things have got worse since then because the Coalition government gutted the bureaucracy by giving the Big Four hundreds of millions of dollars a year in consulting work. Government has been privatised, outsourced to these firms, and others like McKinsey, Boston Consulting and Accenture. It is now a billion dollar a year business – federal government consulting income alone – yet nobody seems to have stopped to ask: how can it be efficient to take work from a public servant who knows what they are doing and give it to an external consultant whose charge-out rate is $1,000 an hour?

**Poachers and gamekeepers**

The difference with the Big 4 over other consultants is that the enormity of their conflicts of interest. They have three main businesses: consulting, tax advice and audit. We have already covered the untenable conflict between advising governments on how to capture tax and corporate clients how to evade it.

Yet the conflict between their tax and audit divisions is equally preposterous. How can the same firm tell the same corporate client how to be as aggressive as possible dodging taxes in Australia then mark its own homework by reviewing and signing the accounts as “true and fair”?

These conflicts are precisely what the last Senate inquiry into the Big 4 heard. Yet the inquiry into audit standards, despite gross evidence to the contrary, was a whitewash.

Such was the influence and interference of the Big 4 in the political process that the inquiry was swiftly killed off and buried. Behind the scenes this is what is happening again now, although the damage this time will be harder to repair for the big firms and their armies of PR people and lobbyists.

Dawn of understanding

This time, things are starting to click in a public understanding sense; not nearly enough, but enough to begin the process of what inevitably must happen – the bust-up of the Big 4.

Themes to emerge in testimony and interrogation (particularly by senators Barbara Pocock and Deborah O’Neill):