(Image: AAP, Zennie/Private Media)

Until recently, not many people had heard of the Tax Practitioners Board (TPB). 

The national agency is responsible for registering and regulating tax agents and suburban accountants. By all measures, it’s been a relatively sleepy corner of the regulatory universe. 

All that has changed in recent months, after the TPB released a fascinating decision earlier this year about PwC tax guru Peter-John Collins. If you’ve been following the ever-expanding PwC scandal, you’ll know that the crucial information about Collins leaking top-secret tax information to a bunch of multinational clients came from the TPB — as a result of it banning Collins from tax work for two years. 

If a two-year suspension sounds like a pretty tame response to one of the worst integrity scandals in Australian professional services, welcome to the mild, mild world of Australian regulators. 

The TPB had known about Collins’ tax leak for three years before this decision was finally made. But the TPB wasn’t the only regulator that knew and struggled to take action. We learned in Senate estimates this week that Treasury, the Australian Tax Office (ATO) and the Australian Federal Police all knew about Collins and his double-agenting from as far back as 2018. 

The ATO took the case seriously, appointing a taskforce to look into it and the tax minimisation implications. But legal advice about taxpayer secrecy meant it couldn’t go public. So the ATO referred to the AFP, which looked at a criminal referral about Collins but found it all too complex and difficult. Eventually the matter was sent back to the TPB.

Now the AFP has received a follow-up referral from Treasury — let’s hope this time they make a better fist of the investigation. But don’t hold your breath. Keystone capers like the five-year saga preceding May’s PwC imbroglio are all too common in the somnolent atmosphere of Australian federal regulation.

Australia’s regulators are simply not very good at regulating. Since the turn of the century, and probably earlier, scandal after scandal have revealed a common factor: a regulator asleep at the wheel.

The most prominent example is banking and financial services, where multiple scandals eventually led to the banking royal commission chaired by Kenneth Hayne. Devastating evidence at the commission showed that key federal regulator ASIC was clueless while big banks and finance companies arranged their affairs to charge fees to dead people, among other scarifying revelations. 

ASIC’s failings over a decade in the run-up to the royal commission have received plenty of scrutiny, even beforehand. Perhaps its most infamous episode was the Trio Capital debacle, a superannuation scam that saw more than $100 million siphoned out of retirement accounts to secrecy jurisdictions in the Caribbean. Despite a tip-off from finance analyst John Hempton, ASIC bungled the investigation, allowing key players to escape with most of the loot. 

Horrified families and relatives saw a similar regulatory failure revealed in the aged care royal commission, where an underfunded and quiescent Aged Care Quality and Safety Commission (ACQSC) was shown to be unwilling and unable to discover, let alone prevent, shocking abuses of vulnerable aged care residents. The royal commission’s final report was scathing about ACQSC, writing that it had “not demonstrated strong and effective regulation” and that “the regulator adopted a light touch approach to regulation when a more rigorous system of continuous monitoring and investigation was required for aged care”.

Perhaps the most important failed regulator is the Australian Competition and Consumer Commission (ACCC), which has extensive powers to improve competition and attack cartels but seems unable to use them in any meaningful way. Australia has one of the most concentrated and oligopolistic economies in the rich world, something the ACCC sometimes acknowledges, but only to wring its hands. 

The ACCC’s enforcement priorities, for instance, include “competition and pricing issues in gas markets”. This must seem like a bad joke to big manufacturers and ordinary households, who have seen their gas bills skyrocket since 2022, even while local gas production surges. 

Gas production in eastern Australia has roughly tripled since 2015. Despite this, consumers are paying record prices. The main reason is that gas is the very opposite of a free market, with much of the available supply locked up in long-term overseas contracts, while domestic consumers are rationed. As a result, Australian consumers pay some of the highest gas prices in the entire world, despite Australia being one of the world’s largest gas producers. 

East coast gas production is controlled by just three joint ventures. As veteran investment analyst Bruce Robertson points out, it’s a triopoly that uses its market power to lock in sky-high prices: in other words, a cartel. 

Despite being legally empowered to litigate against cartels, the ACCC is nowhere on domestic gas. Indeed, the ACCC helped create the problem, waving through Shell’s acquisition of Arrow Energy in the 2010s. To add insult to injury, Shell is using the old “transfer pricing” shell game to lower its tax requirements, selling east coast gas through its Singapore hub. Nor is the ACCC doing anything about astonishingly profitable oligopolies in supermarkets, airlines or banks. 

Once you start looking for them, sleepy regulators are everywhere in Australia. Sometimes their impotency is because of a simple lack of resources — a good example would be the Office of the Information Commissioner, so starved of funds that FOI commissioner Leo Hardiman resigned in March because he couldn’t do his job properly.

But ASIC and the ACCC have plenty of money. Their real problem is willpower. Deep down, the ACCC doesn’t actually want to intervene in distorted markets in favour of greater competition. ASIC doesn’t really want to enforce tough laws on bankers. 

After the stern words from Kenneth Hayne at the royal commission, ASIC rejigged its enforcement policies with a new mantra of “Why not litigate?”. But as it turned out, the moto barely lasted longer than some of ASIC’s court cases: “Why not litigate?” has been deleted from ASIC’s various websites and the 2021-25 corporate plan. All too hard, according to Frydenberg-appointee Joe Longo. 

Australian regulators have a bias against taking legal action. When in doubt, they prefer a quiet word, perhaps a stern warning, or at most an enforceable undertaking. Litigation is rare, criminal charges even rarer. The TPB’s slap on the wrist for PwC’s Collins is the perfect case in point. 

Hardly anyone goes to jail for corporate wrongdoing in Australia. A classic example was the notorious collapse of Storm Financial, an $800 million implosion that cost thousands of investors their life savings. After nearly a decade of litigation, Storm directors Emmanuel and Julie Cassimatis faced no criminal charges and eventually received just $140,000 in fines. 

To take another prominent example, Westpac’s record $1.3 billion fine from AUSTRAC for $23 million of money laundering breaches caused zero individual consequences for any Westpac executives. Or remember AMP’s notorious “fees for no service”, where the large finance corporation charged fees to dead people? Despite plenty of negative headlines, AMP eventually paid just $14.6 million in civil penalties, followed by a further fine of $24 million. No individual was charged. 

As Swinburne academic Helen Bird told the ABC’s Dan Ziffer in a 2019 interview, even if regulators do prosecute, judges are loathe to jail white-collar executives. “[There’s] a very conservative approach to the awarding of sanctions against white-collar crime coupled with a preference to go with a civil penalty route,” Bird said.

International examples show that muscular regulation is possible when regulators decide they actually want to use their considerable powers. Whatever else you might say about American justice, in the US, white-collar criminals do actually go to jail. Enron’s Jeffrey Skilling, WorldCom’s Bernard Ebbers and notorious Wall Street financier Bernie Madoff all served long sentences in the wake of corporate scandals. Sam Bankman-Fried, the disgraced founder of collapsed cryptocurrency exchange FTX, may be about to join them. European regulators have also seen fit to pursue high-profile corporate wrongdoers, including multiple executives involved in Volkswagen’s emissions scandal. No one would suggest that the economies of the EU or the US are any less robust as a result of such actions. 

But there is one Australian regulator that powerful people really are scared of: the New South Wales Independent Commission Against Corruption. With the Commonwealth finally about to get its own federal anti-corruption agency, the NACC, Peter Collins and his former colleagues at PwC might just be feeling a little nervous. For Australian citizens and taxpayers, it won’t be before time.