The dispute over the advice of PricewaterhouseCoopers (PWC) in Australia continues to escalate: On Wednesday evening, the Chancellor of the Exchequer announced in Canberra that he had now passed the case on to the Federal Police. Treasury Secretary Steven Kennedy stated that PWC's former partner for international taxation, Peter Collins, had used confidential information inappropriately. The government is pushing ahead with the case in the face of sharp criticism from senators. They demand that the e-mail correspondence of PWC employees and the names of the companies profiting from the consultants' breach of trust be disclosed.

Christoph Hein

Business correspondent for South Asia/Pacific, based in Singapore.

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But it gets even worse for the advisers: Kennedy also speaks in his statement of the fact that "numerous people within PWC, directly and indirectly, were privy to the confidential information." Due to the "seriousness of the misconduct", the police should now consider whether criminal prosecution should be initiated against the consultants.

For consultants, the stakes are also increasing worldwide: politicians, experts and lobby groups are calling for PWC to be excluded from government contracts in the future. The idea is supported not only by Green Senator Barbara Pocock, but also by former top official Andrew Podger, the more critical Australia Institute and the conservative Institute of Public Affairs. In the past two years, the consultants had received contracts worth 537 million Australian dollars (330 million euros) from the government in Canberra. In addition, however, there was insider knowledge and an enormous increase in their reputation, as they supported ministers in bills. In the meantime, a de facto ban on new orders is said to have prevailed, as no official wants to involve PWC anymore. This is likely to be perceived with great interest in other countries as well.

Not only Australian customers affected

Thanks to their work, some consultants were aware of the government's tax plans. They then passed these plans on to colleagues, at least some of whom used them to advise major customers (F.A.Z. of 9 May). For example, American customers of PWC are also affected by the cross-border tax rules. The disclosure of planned changes gave them the opportunity to adapt to them at an early stage and thus possibly gain a great competitive advantage. Australian politicians therefore speak of a fraud by Australian taxpayers.

As the breach of trust gradually became known, several heads rolled at the top level of PWC in Australia; the previous chairman of the board, Tom Seymour, also gave up his position after a while. At the end of September, he wants to leave the company altogether – which some of his partner colleagues consider far too late. In the meantime, PwC has declared its intention to set up its own committee of inquiry to calm the waves. It is to be led by the former chairman of the board of directors of the telephone company Telstra, Ziggy Switkowski, and will examine the entire leadership and culture of the consultants.

But that's not enough for Labor Senator Deborah O'Neill. The fact that PWC only wants to publish selected results of the investigation shows that the audit lacks "any credibility". Senator Pocock agreed: the approach was "completely inadequate compared to what is now needed". "It's like someone accused of corruption having their own trial," she said.