The Australian government has announced a crackdown on tax adviser misconduct following the PwC scandal. The government will increase penalties for promoting tax avoidance schemes tenfold and give financial regulators much stronger powers. Advisers and firms promoting tax exploitation schemes could now face fines of up to $780 million.
The Treasurer, Jim Chalmers, says the new regulations, described as "the biggest crackdown on tax adviser misconduct in Australian history," is necessary to rebuild public trust in the tax system and to ensure that multinationals pay their fair share of tax in Australia. The reforms are also intended to address the "severe shortcomings" in the nation's financial systems which were exposed by the PwC scandal.
In a joint statement, the Mr. Chalmers, Finance minister, Katy Gallagher, the Attorney General, Mark Dreyfus, and the Assistant Treasurer, Stephen Jones, described the crackdown as taking steps to clean up the PwC mess:
“The PwC scandal exposed severe shortcomings in our regulatory frameworks that were largely ignored by the Coalition, and today we’re taking significant steps to clean up the mess...We’re cracking down on misconduct to rebuild people’s faith in the systems and structures that keep our tax system and capital markets strong. We’re also cracking down on the scourge of multinational tax avoidance and making sure multinationals pay their fair share of tax in Australia.”
The Treasury department will also undertake a comprehensive two-year assessment of existing regulatory frameworks, seeking to rectify the issues exposed by the unauthorised disclosure of confidential tax information.
The government also plans to bolster the authority of the Tax Practitioners Board (TPB), allowing it to terminate contracts, refer ethical misconduct by advisers for disciplinary action, and offer better protections for whistleblowers.
What is the PwC Scandal?
The ongoing PwC scandal refers to allegations that PwC partners used confidential government information to help their clients avoid tax.
The scandal came to light in January 2023 when The Australian Financial Review reported that the former-head of International Tax at PwC, Peter Collins, had shared confidential information about the government's tax plans with clients. PwC is currently the subject of multiple investigations as a result.
The scandal has had a significant impact on PwC itself. The firm has been forced to sell its government advisory business for $1. PwC has also fired nine employees over the past year as a result of instances of bullying, data breaches and workplace and sexual misconduct.