High in their opulent CBD eyries, the architects of global tax avoidance must be indulging in a quiet chuckle, a nervous chuckle perhaps, because the media has once again missed the forest for the trees.
The Queen, Michael Hutchence, the Russians, Lewis Hamilton, Nicole Kidman and Keith Urban have had thousands of column inches devoted to them, blanket coverage; as has the usual bevy of headline corporate names such as Apple, Nike and Glencore, but what of the Big Four accounting firms who sign off on the multinational audits and concoct the tax avoidance strategies as well? What about the masterminds?
The Paradise Papers is a stunning leak, the biggest in history, a damning indictment of the world economic system, and yet another revelation of how the rich are robbing the poor, but KPMG, Deloitte, Pwc and EY – are getting away scot free as usual.
When the story broke, the only mention this reporter could find was in Madrid newspaper El Confidencial:
América del Norte representa la mayor carga de trabajo para la firma (Appleby). Entre sus principales clientes aparecen las mayores consultoras –KPMG, EY y PWC– y grandes bancos y empresas de inversión, incluyendo Citigroup, Bank of America, HSBC, Credit Suisse y Wells Fargo.
This roughly translates the Americans provide most of the work for the “offshore services” law firm at the centre of the leaks, Appleby, and alongside Appleby’s clients are the Big Four consulting firms and the big banks. Deloitte was not named, although it is no doubt there too. EY, PwC and KPMG were named.
In the Australian press and elsewhere however there was very little tampering with the finely burnished reputations of the Big Four. Were they studiously ignored or is this about cowardice, censorship or ignorance as to the way the system works?
No doubt we have missed the odd Big Four mention but here is the rundown: the Australian Financial Review noted, in the 24th paragraph of a story, that Appleby people met major clients, many of whom are leading banks and accounting firms such as KPMG, Ernst & Young and PricewaterhouseCoopers” over cocktails, dinners and conference tables.
The ABC story on Lewis Hamilton and his dodgy private jet rental scheme mentioned there had been dealings with EY, to which EY sanctimoniously responded:
“All our advice, whether in planning or compliance, is based on our knowledge of tax law and providing transparency to tax authorities … our services are underpinned by a firm-wide global code of conduct”.
There was zero mention of EY in the Sky News coverage which is unsurprising as Sky is controlled by Rupert Murdoch and EY has helped Rupert avoid hundreds of millions in tax.
Then there was Huffington Post, a Fairfax Media joint venture partner, which grandly headlined its story, “The Australians embroiled in the Paradise Papers”, quoted other media sources and wrote about Nicole Kidman, Keith Urban, Michael Hutchence and Glencore.
Where were the other Australians mentioned in the 13.4 million documents? The clue to this indifferent coverage lies in this buried paragraph in the Huffpo story:
“As the Australian Financial Review reported “many senior Australian business figures appear in the data in their entirely legitimate roles as executives and directors of offshore subsidiaries and some ASX-listed companies. It should be noted these are standard, legal business structures”.
Okay, who are they then these entirely legitimate people? If they are so legitimate they surely shouldn’t mind being identified as there is nothing wrong with being legitimate. The real answer is of course that the AFR is tireless in cheering on its major advertisers.
For its part, Rupert Murdoch’s The Australian, an equally fervent cheerleader for the Big End of Town, devoted plenty of column inches to colourful King’s Cross identity John Ibrahim and Michael Hutchence. When the story broke, the byline in the Oz was “Press Association” and Nike, Apple, the Queen and few Russians were pinged. Coal miner Glencore escaped the rigour of journalism too, though U2 frontman and social activist, Bono, got a thorough towelling.
Funnily enough – as EY is News Corp’s auditor and has helped Rupert’s empire avoid tax – EY did rate a small mention in relation to Lewis Hamilton, the car racer.
The Big Four have been in the thick of every major tax evasion and tax avoidence racket of the past decade but manage to escape scrutiny. Here are the connections from Paradise Papers – the names that is which have emerged so far, not the ones who have been supressed:
Glencore in Australia was audited by EY until Deloitte took over three years ago. Nike is audited by PwC, as is Bank of America, notable global money launderer HSBC (formerly audited by KPMG), Goldman Sachs and JP Morgan.
Apple shifted from KPMG to EY in 2009.
KPMG audits Citigroup and Credit Suisse. Very often, the same firm which audits the multinational also provides the tax advice – a massive conflict of interest which essentially involves the guard guarding the guard.
This reporter has had a long history of being censored by mainstream media organisations when it comes to chronicling the chronic abuse of the system by the Big Four, including legal threats from PwC and Glencore.
The sad fact of global tax avoidance is that, until these giant accounting firms are made accountable for their behaviour, the system cannot be fixed. In many cases the Big Four would have advised their clients to use Appleby, the firm at the centre of the latest scandal. Appleby is just a law firm which obeys instructions, instructions from the Big Four and their clients. It does not devise global tax avoidance strategies.
In a remarkable developement, the quintessence of hypocrisy, just a week before the release of the Paradise Papers, PwC handed down a report predicting the use of tax havens would soon become “unacceptable”.
“In a report released on October 30, PwC said the public was increasingly hostile towards those perceived to be not paying their “fair share” of tax, and that businesses would need to put more effort into tax transparency in future.”
If you care to google the Big Four however for recent news however you will find headlines like this:
“Gold ceiling feature at PwC Sydney office built with Locker Group’s woven wire”, and “Accountants from EY chip in to paint library and Kiara College”.
While the real culprits continue to hide in plain sight, obeisant media will continue to miss the guts of the story, and pruriently rattle on about the Queen, the Russians, Donald Trump and the odd rock star or Formula One champ.
The media has patently failed to address the real issues and the world is now getting “leak fatigue”. No slight here on the German newspaper which got the 13.4 million files, or the ICIJ which distilled the information and organised the global media “drop”.
This all serves to illustrate the problem. The revelations are a very positive thing. They fail however to make the principle actors accountable and therefore play into the hands of the racketeers, those who orchestrate the biggest rort in human history.
As for the perennial, nauseating claim that this is all legitimate and nobody has done anything wrong here … it just doesn’t work like that. The players in the tax avoidance community are a small band of accountants, lawyers and company directors who understand – and play to – the fact that the Tax Office cannot prosecute everybody.
This is a game of evaluating risk of prosecution, a sophisticated game, and just because you haven’t been caught, publicly humiliated and dragged into the courts, does not mean you are acting legally. It certainly doesn’t mean you are acting ethically.
Chevron is a case in point. The other oil majors Shell, ExxonMobil and BP are aggressive tax dodgers too but it was Chevron who got too arrogant and greedy – turning one per cent borrowings into 9 per cent borrowings in order to siphon profits out of Australia. What is illegal? Is it six per cent, eight per cent? What is illegal hinges on the outcome of successful prosecutions.
Arguably, most of it is illegal, theft which has gone without prosecution, because the Tax Act requires that the dominant purpose of a transaction be commercial, not tax driven. And it is clear that the vast bulk of these tax haven arrangements are tax driven. That is the point of zero tax Caribbean islands and other secrecy regimes.
TV viewers may have seen recent advertisements by the government proclaiming that corporate tax avoidance is fixed. Perversely, these dishonest ads are paid for by taxpayers. Yes, early inroads have been made, the government was reluctantly dragged into minor reforms by the Greens and Labor which have brought a couple of extra billion dollars into the national coffers.
It will not be until the government gets fair dinkum and demands far more transparency and accountability by the real culprits that inroads of substance will be made. Forget the Queen, forget Nicole and Keith. These are bit players.
NB: What industry and the players themselves have had to say since the Paradise Leaks is telling – zero.
Big Four lobby group, Chartered Accountants Australia and New Zealand (CAANZ) holds forth on all manner of public policy matters but its “news”, “analysis” and “thought leadership” have only managed to come up with press releases like “Taking Care of Workplace Stress”.
Google the media release sections of each of the Big Four and you will find nothing on the biggest leak in history. What you will find is plenty of advocacy on how the government should be governing, a slew of releases about awards and prizes for this-and-that, and announcements about the opening of new offices in the likes of PNG.
PwC even put out a paper recently pharisaically advising companies about complying with Anti-Money Laundering and Counter Terrorism Financing (AML-CTF) laws although the AML legislation which is supposed to cover accountants, lawyers and property developers has remained in “stakeholder engagement” for the past nine years.
They’ve derailed that one, just like the mainstream media.