Back in July, ABC’s The Business and Michael West featured an extraordinary raft of allegations from a 32-year veteran industry insider turned whistleblower, George Rozvany, who claimed that multinational tax avoidance was “out of control” and cost the Budget up to $50 billion dollars a year in lost revenue.
Rozvany claimed the Big Four accounting firms – PwC, Deloitte, KPMG and Ernst & Young – were the key masterminds behind the tax dodging. He also cited sham transfer pricing arrangements as a key avenue by which multinational tax avoidance takes place.
Now, Michael West has reported that the Big Four accounting firms have taken corporate welfare to an extraordinary level, earning up at least $2.6 billion in fees from the Australian government over the past ten years at the same time as they advise multinationals on how to avoid paying tax:
When it comes to leaners look no further than PwC itself which has picked up $759,736,134.06 over the past ten years from the Commonwealth; almost $760 million in taxpayer money for doing reports – providing advice, paper shuffling.
Let’s not forget Ernst & Young, which banked $525,064,685.80 for writing stuff, and Deloitte with its $415,773,994.86, the lowest of the Big Four leaners but nonetheless a leaner par excellence.
It is KPMG though which takes first prize in the corporate welfare stakes, strapping on $934,351,772.48 of the taxpayer’s finest, clipping almost $100 million a year, leaning like a test rugby pack.
All four have been big donors to the major political parties. All four are the architects of global tax avoidance. All four, while sermonising to government on tax policy, are busy advising their multinational clients how to skulk out of paying tax.
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It’s a theme that was also picked up recently over at Fairfax, which revealed that while the Abbott Government was busy slashing the public service, the Big Four accounting firms have cashed in:
Ernst & Young, PricewaterhouseCoopers, KPMG and Deloitte collectively secured $194 million of work since the Coalition’s election to December 2015.
Many top firms, including Deloitte and KPMG, donated more than $150,000 to major political parties during this period.
“Public servants often go to consultants to reinforce a message because the politicians will take it more seriously,” Professor Sullivan said.
An adjunct professor at the Crawford School of Public Policy, Leo Dobes, said consultants were often hired to tick off government ideas.
“The big four are always getting jobs with the government and it makes you wonder why because, if they have been giving robust advice, surely they would be on the nose?” he said.
There are several reasons why governments increasingly prefer to use consultants over the public service.
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Most notably, it provides them with cover. They can claim that a given policy is based on “independent advice”, even though the results are often pre-determined and effectively purchased. It also allows governments to deflect blame to the consultancy firm (read cover their arse) in the event that a policy goes bad.
However, the problems run deeper than merely replacing one set of workers with a more expensive set of workers. It also reflects the broader loss of independence and the politicisation of the public service, whereby governments of both persuasions are now too willing to outsource policy development to consultants or (erroneously named) think tanks.
Add in the seemingly unbridled growth in the number of staffers and advisors in ministers’ offices, and the role of departments in policy formulation and advice has been badly diminished.
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The days of “frank and fearless advice” are gone in favour of spin and compromised analysis designed to support a pre-conceived political agenda.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
