PwC Australia shared confidential government tax information for commercial gain. Why is that unlikely to happen here in NZ?
Despite the tax advice scandal rocking the Australian business community, experts say the symbiotic relationship between the big four accounting firms and the New Zealand Government is apparently no cause for concern.
The big four in the accounting/consulting world are EY, Deloitte, KPMG and PwC.
PwC Australia partner Peter-John Collins was caught out for sharing confidential Treasury tax plans being worked on by the firm to benefit its clients and to win millions of dollars’ worth of contracts.
The leaked information related to anti-tax avoidance rules being developed by the federal government.
READ MORE:
* I’m pro-public sector, but health money wasted on empty offices shows problem
* The questions over government contractors and consultants
* The public sector problems behind talk of ‘consultant crackdown’
Australian senator Deborah O'Neill, responsible for the publication of PwC’s emails relating to the leak, believes the abuse of information had global implications and was indicative of a widespread cultural problem.
PwC New Zealand didn’t respond to Newsroom’s questions, opting to forward on the professional services firm’s global statements, American spelling and all.
“We expect all PwC member firms to meet the highest standards of professional and ethical behavior. This situation presents a clear violation of our Code of Conduct and our professional standards. It is unacceptable and goes against our culture and our values,” the statement read.
The Ministry of Business, Innovation and Employment, through New Zealand Government Procurement (NZGP), is ultimately responsible for completing due diligence and following up on all external contracts.
Verbal assurance
NZGP director of delivery services Matt Perkins said, “When NZGP became aware of the concerns with PwC Australia, we reached out to PwC New Zealand to seek confirmation it was not involved in any way nor had similar practices in New Zealand.
“We have received verbal assurances of this and expect this to be confirmed in writing. We will continue to monitor developments in this area.”
The current New Zealand Government’s reliance on consultants has been heavily critiqued by Opposition.
Auckland University accountancy law professor Craig Elliffe, who has previously spent time at top professional services firms and is deputy chair of the Tax Advisory Group, said the PwC Australia revelation was “shocking”, but sees limited risk of the same thing happening on this side of the Tasman.
Interestingly, Elliffe believes it is the tight-knit working relationship between consultants and government that safeguards against any abuse of privileged information in New Zealand
He said there was a special secrecy requirement in New Zealand’s tax administration act that had never been breached to his knowledge, but he acknowledged that Australia would likely have a similar provision.
While it wasn’t impossible that the access to privileged information allowed to consultants could be abused in New Zealand, he said a collegial industry attitude made it highly unlikely.
“Our culture is quite unique in New Zealand. Because it's a very small community and people know each other, there is a high level of trust, but within that trust there is also a lot of responsibility.
He said in a larger, less trustful industry it was easier for business activities to be more partisan, “I suspect that's probably what would have happened in Australia, that it was a bit more of a 'them and us' type of situation and someone involved became aware of information that they could exploit.
“I just don't think that's the environment that we operate in. We have a much higher trust model, and I don’t think I’m being naïve, it’s just the way New Zealand operates.”
Without evidence of similar behaviour on New Zealand soil, Elliffe said a review of the relationship between government and consultants was probably unnecessary.
Every confidence
Inland Revenue spokesperson Gay Cavill said the department was aware of the Australian situation, but not any similar leaks in New Zealand.
“Inland Revenue relies predominantly on its employees in formulating and informing tax policy. However, on relatively rare occasions, Inland Revenue has used external contractors to assist with specific areas of tax policy.”
When those external contractors are used for tax policy work, they must sign a certificate of confidentiality, a breach of which could result in a criminal prosecution.
“We have every confidence in the contractors we work with, the confidentiality agreement they work under, and our ability to enforce our legal confidentiality requirements,” Cavill said.
IRD isn’t a huge user of consultants, but the Government’s top users had similar sentiments.
Public Service Commission records on consultant spend for the 12 months to June 2022 tallied up to $1.24 billion.
The largest spenders were the Ministry of Education with $237m spent on consultants and contracting, the Ministry of Health spent $154m and the Ministry of Social Development $116m.
Both the Ministry of Health and Ministry of Education said beyond confidentiality clauses steps taken included implementing restricted access to information systems, applying protective markings on documents and disclosing information to externals only on a need-to-know basis.
Consultant reliance
Massey University senior lecturer and public management history expert Dr Andrew Cardow said Australia was ranked lower than New Zealand on Transparency International’s corruption index, in theory meaning corruption like from PwC Australia was less likely to happen here, though not impossible.
New Zealand is at second best on the rankings, (even with Finland) while Australia sits at a respectable number 13, sandwiched between Hong Kong and Canada.
“You'd expect an amount of corruption if you did not have a transparent, strong and well-paid public sector like we do.”
Reliance on consultants to do core activities in government does worry Cardow.
“It is a concern that there seems to be a fallback position of I will just get a consultancy to do it, and at what point do the consultants stop being consultants and start being de facto employees? In other words, doing the work of the government rather than advising government. That's an issue we have.
“I think that consultants are useful to fill in the gaps where the public sector hasn't got the expertise, but if they are doing jobs that the government sector can do, then the government sector should do it.”
Like Elliffe, he doesn’t expect a review of consultant use, but said there could be added pressure to question how necessary bringing in a firm is rather than doing it themselves.
