Not quite Big Four but Big Law a makes a good fist of corporate welfare

by | Aug 23, 2017 | Finance & Tax, Government

While intent on drug testing the social welfare set, the government blithely ignores the taxpayer abuses of Australia’s corporate welfare set.

Federal government spending on consultants – accountants, lawyers and other external advice-givers – has exploded. Even since it assumed office in 2013, the government’s payments to the Big Four accounting firms have doubled; and this at a time when 15,000 jobs were being expunged from the public service.

Over the past ten years, PwC, KPMG, Deloitte and EY have won at least $2.6 billion in fees from the Australian government. These are the titans of corporate welfare, the taxpayer predators sans pareil, but the major law firms have not fared too shabbily either.

Journalist Lachlan Barker has found the federal government alone splashed $1.7 billion on external lawyers between 2006 and 2017. Australia’s big six law firms won at least $852 million of this in fees, or just over half of the total.

Toting up their Commonwealth contracts in research for michaelwest.com.au, Barker found Clayton Utz had picked up $417 million, Minter Ellison $209 million, Ashurst $111 million, Mallesons $57 million, Freehills $36 million and Allens $20 million.

Some of these figures seem suspiciously low however, Barker noted; especially the latter two, Freehills and Allens. Contacted for this story, neither Allens or Freehills were able to shed any light on their apparently low government revenue streams. There are a number of explanations, and it is likely that all the figures are too low.

Contractors can bid for government work using different entity names and it is likely the real figure for government spending on private law firms is in the billions over the past decade.

For one, Barker’s analysis only covers the Federal government, not the states whose tendering disclosures are extremely poor. It is impossible to find anything meaningful from the state databases.

Secondly, firms may, and often do, use different names for different bids. Thirdly, in the case of the law firms, some fees may come via the Attorney-General’s Office which booked $345 million in Austender contract revenue (probably reflecting its expenditure on external lawyers to run cases and give advice).

Besides the gutting of the public service and the challenges of losing expertise to the private sector – which will prove a costly thing for taxpayers in the long-run – both the accountancy and legal firms are, ironically, winning billions in taxpayer fees while advising their wealthy clients how to dodge tax.

Although Labor threatens to shut down the lurk should it reach office, at present it is tax deductible to spend any amount of money getting advice on how to skive out of tax.

So we have a system where the principal engineers of tax avoidance reap billions from taxpayers via government contracts while giving large donations to both major political parties and while a large lick of their non-government income – income deriving from wealthy tax avoiding clients – is tax deductible.

Interestingly, it seems the Big Four may be gunning for Big Law.
PwC’s legal service, which now boasts 23 partners and 105 lawyers, increased revenue by 68 per cent last year into the “tens of millions”.

In the typically obsequious press which followed its latest “annual review”, PwC managing partner Luke Sayers was quoted extolling the “wonderful depth and breadth of people” for the firm’s stunning financial result.

PwC is only required to release a revenue number, nothing more, no detail of how much money it inveigled from government during the year. And so, with inflation and growth nearly flat, PwC proudly unveiled a 10.4 per cent rise in revenue to $2.12 billion for the year to June 2017: a routine revenue rise for PwC and its Big Four peers.

Did it get $300 million from taxpayers? More? Who knows. How much tax did it pay? Like its peers, this is a partnership and it is incumbent upon the partners to pay the tax, not the firm.

We asked a spokesperson how much money came from government deals. No response. We even had to ask where its annual “Transparency” reports were for the past two years; it was too hard to find them on the website. Yet, paradoxically, it was only in 2013 that PwC was hosting its annual PwC Transparency Awards.

Not that PwC is any worse than its peers. In some respects it is slightly better. The quintessential problem is that these four firms have too much political and corporate power in Australia and globally and, as a recent report to European Parliament noted, they are too secretive, not accountable, regularly involved in corporate scandal and they need to be busted up.

“The Big Four – A study of opacity” by the Tax Justice Network found KPMG, Deloitte, EY and PwC deliberately hid the links between their offices in dozens of different countries by claiming they were separate legal entities.

Australia’s March To Corporatocracy

ABOUT THE AUTHOR

Michael West

Michael West

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

4 Comments

  1. Avatar

    Corporate welfare rewards companies that move overseas to avoid taxes and
    the government funds projects that never live up to promises or any real benefits to a working population. It also disproportionately favours big business.

    If they want to spend money why don’t they spend it on public infrastructure the four factors of production. Classical economics talks about three factors of income — land, labour and capital. But there’s a fourth factor of production, and that’s public infrastructure. The function of public infrastructure, roads and schools is not to make a profit, like a private investor would do. The public aim is to lower the cost of living and doing business, so as to make the economy more competitive. This has all been tossed out with the Neoliberal experiment and what have they replaced it with extraction and gouging with minimal benefits for its citizens.

    • Avatar

      If we had a government-owned bank, government-owned gas and electricity suppliers, government-owned transport, etc. we’d all be better off as we’d have real competition, real accountability and LOWER prices.

  2. Avatar

    Good to see those forensic skills of yours Lockie back at work! Great job Lockie and Mike!

  3. Avatar

    Drug testing and the cash welfare card is a big con and it’s not about helping any drug or booze addict but to help their rent seeker mates to access the govt.coffers to billions of taxpayer’s money.

    It seems to me that capitalists have given up being creative and establishing new industries and instead are being creative using govt ministers in how to exploit the honey pot of govt. coffers.

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