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The Australian Taxation Office (ATO) raised concerns about a confidentiality breach at PwC to Australian Federal Police (AFP) in March 2018, but a lack of detail meant no investigation was launched.
Key points:
- Police last week launched an investigation into a former PwC executive over the use of confidential information
- The ATO commissioner has outlined efforts his team made to try investigate the the PwC matter in 2016
- He said the ATO's laws meant it was limited in it what information it could pass to police
ATO Commissioner Chris Jordan appeared before Senate Estimates on Tuesday night to outline the efforts his team made to try to investigate the matter involving the accounting and consultancy firm right back in 2016.
"Despite our best efforts, due to the obstacles placed in our path, it took a long time to obtain the information requested," he said.
The ATO assigned an assistant tax commissioner and about 20 staff to look into whether PwC had been involved in a significant tax leak that attempted to help multinationals avoid paying tax.
"We had to issue further notices to obtain information that was clearly not subject to legal professional privilege such as internal PwC emails," he said.
Some information was passed onto the AFP, but Mr Jordan explained that the ATO's laws meant it was limited in it what it could provide.
"It comes back to the restrictive nature of our secrecy provisions — it is an offence under our laws for us to provide information that we are not allowed to do so by law," Mr Jordan said.
"It's a necessary thing in 99 per cent of cases, but clearly this is an example where maybe we should have been able to disclose that at least to Treasury.
"It's very restrictive, and one would have to question if that's the right situation for the future."
While the laws allowed some information to be provided to the AFP in 2018, the matter was never discussed with Treasury.
The ATO's Jeremy Hirschhorn said that was because the agency was not allowed to do so.
'We expressed general concerns to Treasury [in 2018] but due to secrecy [laws] we could not share specific information or share specific concerns," he said.
'Insufficient information' to support formal referral to AFP
Mr Hirschhorn said a joint decision between the AFP and the tax office was made not to press ahead with a police investigation looking into PwC in 2019.
"It is fair to say that the information in our possession was indicative that there may have been an offence but, after a year's consideration, this was not a frivolous decision," he said.
"After a year's consideration, there was insufficient information to move."
In a statement, the AFP said the ATO requested advice in relation to the potential misuse of government information by PwC.
"The ATO sought advice on whether there was sufficient information to make a formal referral of the matter to the AFP for investigation," it said.
"A set of representative sample documents were provided to the AFP.
"The AFP assessed, based on the material that the ATO provided, was that there was insufficient information in the material, to support a formal referral."
Last week the AFP launched an investigation after Treasury secretary Steven Kennedy asked the AFP to consider a criminal investigation into the firm's former head of international tax, Peter-John Collins.
The AFP said in a statement it would not outline the details of what would be examined.
"On Wednesday 24 May 2023, a report of crime was provided to the AFP relating to this matter for the first time," the statement said.
"An investigation is underway and no further comment will be made."
Changes to secrecy laws on the table
During Senate Estimates, Greens senator Barbara Pocock declared the current rules were not fit for purpose.
"We are looking at a broken system … the absence of criminal investigative powers and you were unable to investigate the matter further," she said.
However deputy Treasury secretary Diane Brown insisted secrecy provisions were necessary in part to protect the reputation of people being investigated and the laws also gave confidence in regulators and an assurance that information was properly used.
She outlined to senators that there was a review currently being conducted by the attorney-general's department into the laws.
"The review will seek to address concerns raised by multiple reviews about the number, the inconsistency, the appropriateness and complexity of Commonwealth secrecy offences," she told Senate Estimates.
Public consultation opened earlier this year and has now closed.
The final report is due by June 30.
Cost to the taxpayer
Mr Jordan said the actions of the ATO, despite being curtailed by secrecy laws, ensured that big companies did not skirt around the new tax laws.
"Our immediate action prevented any loss of revenue to the Commonwealth from a scheme to avoid the MAAL (multinational anti-avoidance law). We estimate the revenue at risk was $180 million annually," he said.
"We are not afraid to take on the big end of town. We have, and we will keep doing so."
However, there was a cost to taxpayers in the sense that a number of ATO staff were taken off their regular duties to look into the matter.
Mr Hirschhorn outlined the reallocation of employees to address the confidentiality breach.
"By the start of 2019 we actually took an assistant commissioner offline … with a team of, I think, 20 or so staff … solely focused on dealing with these matters."
Labor senator Deb O'Neil said the actions of a PwC staff member did cost taxpayers money because ATO staff were not working on other matters.
"That is a cost to the Commonwealth, a redirection of resources to combat a scheme that was designed off the back of Australia's confidential information by Mr Peter John Collins of PwC Australia and monetised by PwC Australia and PwC global," she said.