A Senate inquiry has recommended major changes to the way the Federal Government uses consulting firms.
Its final report said these firms have been operating in a “grey area“, costing taxpayers billions of dollars.
The inquiry was set up following reports a senior leader at PwC had used secret government information to help multinational companies avoid tax.
It’s recommended naming and shaming all PwC staff involved in the scandal.
PwC scandal
PwC is one of the biggest accounting firms in the world. The company made $US53 billion ($AU80b) in gross revenue last year and has nine offices in Australia.
In 2013, then-head of International Tax, Peter Collins, started advising the government on how to stop big multinational companies from dodging tax. The work required him to sign a confidentiality agreement.
He later leaked the secret information to help some of his clients avoid paying tax in Australia.
Inquiry
After tax authorities investigated Collins’ behaviour, he was deregistered as a tax agent in December 2022 for two years.
When this became public a month later, Treasurer Jim Chalmers said he was “furious” at the revelations.
In March 2023, the Senate set up an inquiry into the integrity of consulting services used by the Federal Government.
The inquiry found the Federal Government has been increasingly reliant on consultancy services, awarding billions of dollars in contracts to Australia’s big four firms: PwC, KPMG, Deloitte, and EY.
The firms have carried out roles such as policy advice, strategy, planning, and research across government departments like social services and the treasury. Many of these roles were once filled by public sector staff.
The final report stated: “Australia’s spending on consultancies is greater than that of any other country by population.”
Issues
The inquiry found there had been serious questions about consultants’ accountability, transparency, and conflicts of interest when they were hired to perform work for the government.
The report said: “It has also resulted in enormous costs to the [public service] for work that is often opaque and, in some instances, raised genuine questions regarding value for money.“
It made 12 recommendations for improving transparency and reforming the public sector.
Name and shame
The key recommendation was for PwC to reveal the names and details of at least six overseas partners and employees who had been involved in the company’s tax leak information scandal.
PwC has declined to provide further details of these employees.
Government contracts
Government contracts were also in the spotlight, as the inquiry suggested the government change the way it outsources work to consulting firms.
This would include adding a clause in contracts requiring consultants to work in the “public interest”.
It also suggested AusTender, the website listing companies hired to work for the Government, should publish more details about public contracts.
Response
Public Service Minister Katy Gallagher has previously referred to the large volume of outsourced consultants as a “shadow workforce”.
She said the Government has already taken action, telling TDA: “More than 8,800 public servants are now performing work that had previously been outsourced”. She added it would consider the report’s recommendations.
Liberal Senator Richard Colbeck, who led the inquiry, said he hoped the government would accept all 12 recommendations. He said “decisive action is required”.
Greens Senator Barbara Pocock, who was on the committee, said the final report only goes “10% of the way towards fixing this problem.”
Pocock is calling for a ban on political donations from consulting firms and harsher penalties on PwC for its tax leaks scandal. She said “only Peter Collins has paid a price as the PwC ‘bad apple’” and the company hasn’t “come clean” about other employees involved.
In a statement to TDA, a PwC spokesperson said the company is taking “significant steps” to improve its practices and “rebuild trust and confidence with our stakeholders”.
