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PwC has been directed to remove all staff who knew about the leak of confidential government tax plans from any government contracts after the head of the Finance Department said the consulting firm undermined confidence by failing to disclose the extent of the breach.
The Australian Federal Police has also launched a “priority investigation” into PwC after the federal Treasury secretary referred it to federal authorities on Wednesday.
Finance Department secretary Jenny Wilkinson said it had directed PwC to remove all staff who had knowledge of or had been directly involved in the breach from any current or future government contracts.Credit: Alex Ellinghausen
The secretary of the Finance Department, Jenny Wilkinson, told a parliamentary committee on Thursday the department first heard about the Tax Practitioners Board’s investigation into PwC through media reporting earlier this year.
That investigation found PwC’s former Australian head of international tax, Peter Collins, made unauthorised disclosures of confidential information about government plans to combat tax avoidance.
Shortly after that came to light the Finance Department contacted the firm, and Wilkinson told the Senate estimates committee that PwC failed to tell the government the issue was broader than the media had been reporting.
She said the department became aware through news reports earlier this month that more than 50 staff had knowledge of the confidential tax information.
“Critically, PwC did not indicate to my department that the issue was broader than what was being published in media reports at that time,” she said.
“This additional information raised serious concerns about the broader culture within PWC and undermined our confidence in their earlier engagements with Finance around this matter.”
Wilkinson said Finance had since directed PwC to remove all staff who had knowledge of or had been directly involved in the breach from any current or future government contracts.
Those staff would not be allowed to return to working with the government until PwC’s review of the incident, conducted by Ziggy Switkowski, had been completed and the department was satisfied with its findings.
The department would also update its procurement arrangements to develop a supplier code of conduct, outlining standards it expected from contractors through procurement processes and while they were under contract. The code of conduct was expected to be finished before the end of the year.
“I consider PwC’s abuse of confidence and trust with the Treasury and PwC’s subsequent handling of this breach to be a very serious issue,” Wilkinson said.
“We will continue to monitor the situation closely, including PwC’s responses to our directions and any further information that comes to light, and any further outcomes for investigations that are undertaken in relation to this matter.”
PwC has said it deeply regrets “that we have failed the high standards we set for ourselves as an organisation”.
“We now need to re-earn trust, which is why we have taken appropriate action, including the announcement that we will establish an independent review in relation to our governance, accountability and culture.”
AFP deputy commissioner Ian McCartney confirmed police were investigating a person in relation to the PwC tax scandal, and said they would look at further people if necessary as the investigation continued.
“It’s now an active investigation,” McCartney said.
On Wednesday night, Treasury secretary Steven Kennedy asked the AFP to launch a critical investigation, saying emails tabled in parliament earlier this month “highlighted the significant extent of the unauthorised disclosure of confidential Commonwealth information and the wide range of individuals within PwC who were directly and indirectly privy to the confidential information”.
McCartney said the AFP was investigating potential breaches of section 70 of the Crimes Act, which prohibits the release of confidential information by Commonwealth officers. The offences are punishable by up to two years in prison.
The AFP also defended its ability to investigate a former partner with PwC while retaining millions of dollars worth of contracts with the consulting giant.
AFP Commissioner Reece Kershaw rejected suggestions he had a conflict of interest because he is friends with former NSW police commissioner Mick Fuller, now a senior PwC employee.
Greens senator David Shoebridge said it was an “impossible conflict of interest” for the AFP to investigate the firm’s conduct while granting it access to its systems as an internal auditor and pressed the organisation to sever its relationship with PwC.
The AFP awarded Fuller a contract in his PwC capacity to prepare a report on ACT Policing.
According to the parliamentary library, the AFP has six current contracts with PwC worth $6.73 million.
Kershaw said he could understand that it might look like the AFP had a conflict of interest because it was investigating a former senior official at the firm while continuing to work with the company.
But he said he had confidence in the integrity of the AFP’s processes because the organisation was good at “compartmentalising” its work.
With Colin Kruger
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