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Look What PwC Made the Australian Government Have to Do

Woman wearing a dunce cap writing I WILL NOT on a concrete wall

The Australian government released exposure draft legislation yesterday in response to “the PwC matter” and the funniest part is the special email they made to receive comments: [email protected]. Not ConsultingReponse or Sept23TaxReform, specifically PwCResponse.

In four separate exposure drafts that amend the Taxation Administration Act 1953 (TAA) and/or the Tax Agent Services Act 2009 (TASA), the government is seeking stakeholder comments on proposals that would strongly discourage the behavior that led former PwC partner Peter Collins to bring confidential Australian Tax Office information back to the firm for the purposes of converting this information to billable hours. Australian Financial Review‘s Neil Chenoweth calls the proposals a “tax sector crackdown” and explains the finer details here.

We’re just going to pull the proposals directly from Treasury’s website. The goals are to strengthen the integrity of the tax system, increase the power of regulators because this is why we can’t have nice things, and strengthen regulatory frameworks to ensure they are fit for purpose. Factsheets and the full drafts can be found at each link below.

Response to PwC – reform of promoter penalty laws

These amendments relate to the priority area identified for action in the government’s PwC response: Strengthening the integrity of the tax system.

The draft legislation will:

  • increase the time the Australian Taxation Office (ATO) has to bring an application for civil penalty proceedings in the Federal Court of Australia from 4 years to 6 years
  • align the maximum civil penalties that the Federal Court of Australia can impose on promoters with those in the Corporation Act 2001
  • expand the application of the current regime, including broadening the scope of important definitions, to overcome difficulties faced in the application of the provisions.

Note: Promoter penalty laws were introduced in 2006 to deter tax practitioners from promoting tax avoidance and evasion schemes to their clients, clearly they weren’t strong enough. Says the government response to the PwC tax leaks scandal (embedded at the bottom of this post):

Collectively, these changes will ensure promoters of tax exploitation schemes face significant consequences for their actions and make it uneconomic to engage in this behavior.

This will deter tax practitioners from making unauthorized disclosures of confidential information, or misusing confidential information, as occurred in the case of PwC, for financial gain.

Response to PwC – information sharing

These amendments relate to the priority area identified for action in the government’s PwC response: Increasing the power of our regulators.

The draft legislation will:

  • remove limitations in the tax secrecy laws that were a barrier to regulators acting in response to PwC’s breach of confidence, and
    enable the Australian Taxation Office and Tax Practitioners Board to refer ethical misconduct by advisers (including but not limited to confidentiality breaches) with prescribed professional associations for disciplinary action.

Response to PwC – Tax Practitioners Board reforms

These amendments relate to the priority area identified for action in the government’s PwC response: Increasing the powers of our regulators.

The draft legislation will:

  • enhance Tax Practitioners Board (TPB) investigation processes by extending the time period the TPB has to conduct investigations into suspected misconduct from 6 months to 24 months
  • improve the TPB Register by lifting its functionality and utility, and increase the transparency of tax practitioner misconduct.

Response to PwC – whistleblower protections

In August 2023, the government announced a package of reform in response to tax adviser misconduct in Australia, to ensure that tax advice is provided in accordance with appropriate professional and ethical standards.

The package of reforms included:

  • extending whistleblower protections for disclosures to the TPB, as well as a number of bodies that provide assistance in relation to whistleblower disclosures
  • aligning some protections in the tax whistleblower regime with the Public Interest Disclosure regime,
  • enabling the Australian Taxation Office, ACNC and TPB to share disclosed information more effectively.

The comment period closes on October 4.

As for the full package of reform, find that below. It’s essentially eleven pages of mammoth paperwork the Australian government has to do after PwC naughtily endeavored to help clients avoid future tax laws while destroying the firm’s — and all of consulting’s — relationship with not just the Australian Tax Office but the whole of Australian government. Nice job, guys.

Australian government response to PwC tax leak scandal by Adrienne Gonzalez on Scribd