Federal Government Announces Biggest Crackdown on Tax Misconduct in Response to PwC Scandal
Key Highlights :
The PwC scandal has left the federal government with no choice but to take drastic action to crackdown on tax misconduct. In response, the government has announced a raft of major changes that will see law-breakers facing eye-watering penalties and regulators given sweeping new powers. This is being touted as the “biggest crackdown” on tax misconduct in the nation’s history.
The government has said the overhaul is a response to the “severe shortcomings” in regulatory frameworks, exposed by the scandal engulfing the beleaguered consultancy giant. PwC is facing multiple probes – including a federal police investigation – after it was revealed former taxation partner Peter Collins had leaked sensitive and confidential government information to fellow partners and clients.
As part of the changes, advisers and firms who promote tax exploitation schemes will now face fines of over $780m – a 10-fold increase from the current penalty of $7.8m. Red tape surrounding regulator actions will also be slashed, with the tax office and Tax Practitioners Board (TPB) to be given new powers to refer ethical misconduct by advisers to professional associates for disciplinary action.
In addition, new legislation to buff the TPB’s powers will be introduced to parliament, while the board will receive a $30m funding boost in the upcoming October budget. The government is also introducing stronger protections for whistleblowers, increased investigation scopes for the TPB and a host of treasury reviews into tax system fraud, the regulation of consulting, accounting and auditing firms and the information-gathering powers of the tax office.
Limitations in the tax secrecy laws which were a barrier to regulators acting in response to PwC’s breach of confidence will also be scrapped. Treasurer Jim Chalmers said the PwC scandal exposed severe shortcomings in regulatory frameworks that were largely ignored by the Coalition.
“We’re cracking down on misconduct to rebuild people’s faith in the systems and structures that keep our tax system and capital markets strong,” Mr Chalmers said. “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.”
The scandal has already attracted the ire of multiple parliamentary committees who are looking into the matter. It’s clear the government is taking the matter seriously and is determined to ensure that similar scandals don’t happen in the future. The changes they have announced will go a long way towards restoring faith in the systems and structures that keep our tax system and capital markets strong.
