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Global accounting firm PwC has responded to widespread media reports that it was a prime architect behind offshore tax schemes that enabled the Australian arms of international companies to funnel huge profits overseas.
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PwC responds to offshore tax scandal reports
07 November 2014
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“Today's reports in the media on tax advice in Luxembourg co-ordinated by the International Consortium of Investigative Journalists (ICIJ) are based on partial, incomplete information dating back four years or more, which was illegally obtained,” PwC said in a statement.
“PwC provides independent professional advice to clients on the issues that are important to them in running their businesses including a wide range of tax issues,” it said.
“This can include advice on the taxation of potential business transactions in a particular country. We also assist our clients with the preparation of tax returns and with discussions with tax authorities.”
The international accounting group said its advice and assistance is given in accordance with applicable local, European and international tax laws and agreements and is guided by the PwC Global Tax Code of Conduct which has been in place since 2005.
“Our global tax code sets out guidance for our tax professionals around the world on a range of issues, including taking into consideration how any tax decisions will be viewed by wider stakeholders,” it said.
“Our client relationships are governed by strict confidentiality; we cannot comment on individual cases.”
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PwC and the rest of the big four accounting firms were recently exposed in a report by the International Consortium of Investigative Journalists (ICIJ) as the prime architects behind offshore tax schemes.
Confidential documents obtained through ICIJ’s “Offshore Leaks” investigation show that big four firms Deloitte, EY, KPMG and PwC had a close relationship with Portcullis TrustNet, a Singapore-based offshore services firm that sets up hard-to-trace offshore companies for clients around the world.
PwC, for example, helped incorporate more than 400 offshore entities through TrustNet for clients from mainland China, Hong Kong and Taiwan, the records show.
“Another stash of confidential documents reviewed by ICIJ show that between 2002 and 2010 PwC helped hundreds of global companies obtain confidential tax deals from authorities in Luxembourg, allowing Amazon, Abbot Laboratories and others to book profits in the tiny European duchy and shrink their taxes at the expense of national treasuries around the world,” the ICIJ report said.
“In the US, authorities charged, KPMG peddled offshore tax shelters that created billions of dollars in fake losses for rich clients, then misled the Internal Revenue Service about how the shelters worked,” it said.
“In Dubai, anti-corruption advocates claim Ernst & Young helped the Middle East’s largest gold refiner obscure practices that may violate international standards aimed at combating trafficking in “conflict gold”, which comes from regions where competition for the mineral breeds bloodshed.
“In New York, authorities charged, Deloitte helped a British bank violate sanctions against Iran, submitting a “watered-down” report to regulators that omitted information about how the bank might be evading money-laundering controls."
“These firms are supposed to be built on honour and integrity and being a watchdog, but they’re so big now it’s all about making money,” said Francine McKenna, an accountant who has worked for PwC and KMPG and now writes a blog, re: The Auditors, about big accounting firms’ misbehaviour.
“They’re not worried about reputation, because all of this stuff has not affected their ability to get bigger and bigger and bigger.”
Big four firms deny their practices are skewed by bottom-line considerations.
Ernst & Young told ICIJ that it “operates strictly within the law and has exhaustive controls” that ensure it follows legal and regulatory rules.
KPMG and PwC said they had strict codes of conduct for everyone working under their banners worldwide.
Deloitte didn’t answer questions for the ICIJ story, but has laid out its views in various public statements.
The ICIJ report comes as documents submitted by PwC to Luxembourg officials help reveal how Swedish furniture company IKEA’s Australian arm earned close to $1 billion in profits since 2003, most of it exported to Luxembourg and the Netherlands.
Fairfax Media today reported that leaked tax documents from PwC in Luxembourg show how online retail giant Amazon’s Australian operations avoid the 30 per cent tax rates of its local competitors.
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