Tax-dodging PwC has no credibility in GST debate

Yesterday the multinational auditing and consulting firm PricewaterhouseCoopers released its contribution to the GST anniversary celebrations: a report showing that increasing the GST and widening its base would raise tens of billions of dollars, instead of “corporate and (progressive) personal income taxes” that damage economic growth.

PwC’s report was covered by Nine’s tabloids, the AFR and The Australian. The AFR linked it to the report released last week by New South Wales that also called for the GST to be lifted to fund cuts to company and personal income taxes.

Interestingly, no one appears to have noticed that a key paper relied on by authors of the NSW report found that company tax was not merely the least economically damaging tax, but had a net economic benefit.

None of the coverage of the PwC report mentioned that it is, with the other big four audit firms, one of the biggest contributors to tax avoidance in the world.

Some of its global tax dodging highlights in recent years include:

• In November 2014 the Luxleaks papers released by two PwC whistleblowers revealed that PwC had brokered tens of thousands of deals to dodge taxes for hundreds of firms in the tax haven of Luxembourg. Australian firms were involved. PwC’s response was to complain about the whistleblowers, who were later charged and convicted.
• In February 2015, referring to the Luxembourg scandal, the House of Commons public accounts committee found that “PricewaterhouseCoopers’ activities represent nothing short of the promotion of tax avoidance on an industrial scale”, saying “contrary to its denials, the tax arrangements PwC promotes, based on artificially diverting profits to Luxembourg through intra-company loans, bear all the characteristics of a mass-marketed tax avoidance scheme. We consider that the evidence that PwC provided to us in January 2013 was misleading, in particular its assertions that ‘we are not in the business of selling schemes’ and ‘we do not mass-market tax products, we do not produce tax products, we do not promote tax products’.”
• In November 2017 the Paradise Papers revealed how PwC helped the private equity firm Blackstone avoid millions in stamp duty in a tax avoidance scheme.
• In February 2018 a peer-reviewed study found “a strong positive correlation between using a big four accountancy firm for auditing purposes and the extent to which [multinationals] build, manage and maintain tax haven networks”.
• In May a UK millionaire sued PwC for not enabling him to avoid more tax by shifting offshore.

PwC has been just as diligent in tax avoidance in Australia. In September last year all the big four firms were identified as a systemic tax risk by the Australian Tax Office.

In June the ATO commenced legal action against PwC and its client, abattoir firm JBS, and is pursuing the company over what it says are “reckless or baseless claims” of legal privilege to avoid surrendering documents.

The cost to Australia of the abuse of tax havens enabled by firms like PwC is estimated to be about $5 billion a year in lost revenue. But we’re a rich country. It is far worse for developing countries. The use of tax havens alone is said to cost US$500 billion a year globally, including $200 billion from low-income economies. 

In 2015 PwC Australia even released a report calling for lower tax on mines in Africa, warning that African countries seeking a greater share of mining profits would deter investment. (PwC’s claims were demolished by anti-tax evasion campaigners.) 

The $200 billion lost to developing economies translates directly into human lives: health and education services not funded, infrastructure not built, economic opportunities not taken. Curiously, none of that sordid history was mentioned in the coverage of PwC’s GST report.

The pretence that PwC is some sort of independent authority on tax reflects that it not merely falsely claims it doesn’t make money from tax products, but that it claims there is a real separation between its auditing arm, which facilitates tax dodging, and its consultancy arm — a separation the corporate regulator ASIC has repeatedly disputed.

The UK government has moved to force the big four to split audit and consultancy functions.

Fiction of ‘independent experts’

The fiction that the big four are independent experts rather than agents of the world’s biggest tax dodgers is central to their business mode.

A July 2018 study revealed the key role big four firms play in tax policymaking in Europe. They play a similar role here. The Tax Board, a Howard government creation that is “charged with contributing a business perspective” to tax policy, relies on multiple PwC partners.

The government’s deregulation task force advisory panel also uses PwC partners, as does its Black Economy Advisory Board.

PwC is also a major political donor — it has handed $1.9 million to both sides of politics since 2010. And it is a member — with the other big consulting firms — of the Business Council, which incessantly demands cuts to company taxes funded by a rise in the GST.

PwC and its big four counterparts are not credible, independent contributors to public debate, but shills for companies that want to offload their responsibility to contribute to tax revenue on to ordinary households, and which immiserate people in developing countries, who are sicker, poorer and have shorter lives because of the tax-dodging firms like PwC enable. The media should treat them as such.