PwC is facing renewed scrutiny as the national tax regulator steps up investigations into whether the firm misused legal privilege to avoid oversight by authorities and provided misleading tax advice to clients. These inquiries add to ongoing challenges following a previous scandal involving leaks of confidential government information.
The investigations, led by the Tax Practitioners Board, focus on three key areas: claims of legal professional privilege, advice provided to the Foreign Investment Review Board (FIRB) and alleged false information in applications for research and development tax breaks. The actions form part of a broader regulatory response to PwC’s past conduct, where certain partners shared sensitive data to benefit client tax planning.
The regulator is paying close attention to how PwC applied legal privilege, which protects confidential communications between lawyers and their clients. Some experts argue that PwC may have used this principle to withhold documents that could have been damaging if reviewed by authorities. The courts have already determined that at least one claim of privilege was invalid, which led to a confidential settlement with the Australian Taxation Office.
Concerns related to FIRB involve guidance PwC gave to businesses undergoing restructures. Authorities have indicated that while the advice may have technically followed legal rules, it may have misled FIRB about the actual tax benefits. In one case, the advice appeared to understate the extent to which tax could be reduced through the suggested strategies.
Additionally, a current or former PwC partner is under investigation over potentially inflated claims made on behalf of a client applying for R&D tax incentives. A similar case in the past resulted in a practitioner being deregistered and more than $11 million in underpaid taxes, as well as substantial penalties for the client.
These new investigations come as PwC continues internal reforms, including improved governance, risk management protocols and external oversight. However, with regulatory and criminal inquiries still ongoing, including a separate investigation by the Australian Federal Police into the original information leaks, PwC's path to recovery remains uncertain.
