Government consultants who promote tax dodging schemes will be hit with fines in excess of $780 million under planned new measures designed to prevent another PwC scandal.
Treasurer Jim Chalmers, public service minister Katy Gallagher and Attorney General Mark Dreyfus made the announcement in a joint statement over the weekend, vowing to give regulators stronger powers against misconduct by tax advisers after PwC passed on confidential Treasury information to help multinational clients dodge taxes.
“By increasing penalties, giving regulators stronger teeth to investigate and prosecute perpetrators and boosting transparency, collaboration and coordination within government, we are acting to restore public confidence and help prevent this from happening again,” they said.
“Bigger penalties will reduce incentives to use confidential government information to help clients avoid tax.”
Legislation will be introduced this year, with consultation to get underway soon, the government says.
Whistleblower protections
Penalties for consultants who promote tax exploitation schemes will be increased from $7.8 million to $780 million, while the time limit for the ATO to bring Federal Court proceedings on penalties will be increased from three years to six.
The planned legislation will also protect whistleblowers who alert the Tax Practitioners Board to misconduct.
The government says the PwC scandal demonstrated that regulatory frameworks aren’t fit for purpose and raised questions about their adequacy in relation to large consulting, auditing and accounting firms.
This includes governance obligations for sector around transparency, executive responsibility, conflicts of interest and how misconduct is handled.
The ministers say a whole-of-government response to bolstering governance will be formulated over the next two years.
It will include a Treasury examination of how consulting, accounting and audit firms are regulated in collaboration with the states and territories.
Finance will also conduct a review of confidentiality arrangements across all government agencies and consider ways of strengthening the management of conflicts of interest in contracts.
In its initial response to the PwC scandal, the government moved to strengthening and boost funding for TPB.
PwC staff involved in the Treasury breach have been suspended from contract work pending the outcome of Ziggy Switkowski’s independent review of governance, culture and accountability at PwC, which is due to be delivered next month.
The Treasury breach is also the subject of an ongoing criminal investigation by the AFP.
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