Partners at big four consultancy firms could soon be banned from being board members of a regulator that investigates the conduct of their colleagues due to conflict of interest concerns.
The Tax Practitioners Board (TPB), which proved instrumental in uncovering the scale of a scandal involving the misuse of confidential Treasury information by a partner at PwC Australia, has the power to deregister accountants after serious misconduct.
On Wednesday, the Senate will consider the federal government’s legislative response to that scandal, which includes a 100-fold increase in fines for partners or firms who promote tax avoidance schemes.
The Greens claim the Albanese government has also agreed to amend its broader crackdown to also stop senior executives or partners at firms with more than 100 people from becoming board members of the TPB.
“Through this amendment, we’re fixing the loophole that allowed big consultants to regulate themselves,” the Greens senator Barbara Pocock said.
“Before this amendment, regulators could have direct vested interests in those entities they were meant to be regulating. It doesn’t pass the pub test, unsurprisingly it doesn’t work, and it’s astonishing that it was allowed to go on so long.”
The legislation will increase the fines for firms that promote tax exploitation schemes from $7.8m to $780m and give the TPB more time – up to 24 months – to complete complex investigations.
The new amendments would allow the Australian Taxation Office or the TPB to refer suspected ethical misconduct including confidentiality breaches to professional associations for disciplinary action.
“Tax agents and others who advise their clients to avoid Australia’s tax laws must be penalised,” the treasurer, Jim Chalmers, said in a joint media release with the attorney general earlier this year.
“The current tax promoter penalty laws have remained largely untouched since their creation in the 2000s and have only been applied six times. Bigger penalties will reduce incentives to use confidential government information to help clients avoid tax.”
Pocock said the Labor government had also agreed to update the “tax practitioners code of professional conduct” to stress confidentiality obligations and a need to identify, avoid and declare real or perceived conflicts of interest.
“These changes are aimed at strengthening guidelines around confidentiality and conflicts of interest, banning the misuse of government information for personal advantage, greater accountability and transparency and a ban on false or misleading statements,” Pocock said.
The legislation is one part of the government’s response to the misuse of confidential Treasury information at PwC Australia, which is still be investigated by the Australian federal police.
Earlier this year, the finance department revealed it contacted 414 businesses that worked with the federal government seeking to amend their contracts.
The department wanted to include a new clause requiring them to immediately notify the government of any regulatory action, legal proceedings or adverse findings against staff that may affect the commonwealth’s reputation.
The government has also updated its advice to departments on procurement – known as the APS Strategic Commissioning Framework – to encourage more work to be conducted by public servants and to consider a contractor’s previous “behaviour and conduct”.
