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Government Failures Enable Big Four Accounting Firms to Dodge Taxes and Accountability

After a year of scandals, investigations, and public outcry, the veil over the big four global accounting firms—EY, KPMG, Deloitte, and PwC—has been lifted, revealing a troubling lack of regulation. These firms, which receive over $1 billion annually from state and federal governments for consulting and auditing services, have long exploited structural loopholes to avoid paying their fair share of taxes. A recent NSW parliamentary report has called for reform, but the question remains: will government action finally catch up to corporate greed?

The NSW inquiry, led by Greens MP Abigail Boyd, exposed the "pseudo-corporate" structure of these firms, allowing them to sidestep paying an estimated $100 million a year in taxes. The report recommends significant changes, including taxing partnership earnings and ensuring large consulting firms contribute to payroll taxes. If adopted, these reforms could add $50-60 million per year to the NSW budget—funds sorely needed for public services like housing.

However, despite such recommendations, government efforts have repeatedly fallen short in holding these powerful firms accountable. The big four have perfected the art of lobbying and influencing policy, ensuring that meaningful regulation is slow to materialize or easily circumvented.

The Illusion of Accountability

At the federal level, a second parliamentary inquiry into the big four is expected to further expose the lack of accountability, regulation, and oversight. Labor Senator Deborah O'Neill has been vocal about how these firms have hollowed out the public sector by monopolizing government contracts and consultancy work. According to O'Neill, the reliance on private consulting firms has weakened public sector capacity, making these firms the go-to for services that could have been managed internally.

This reliance on private consultants is not just a financial burden; it creates a dangerous conflict of interest. The very firms advising the government on policy often have private clients benefiting from those same policies. A prime example is the PwC tax leak scandal, where PwC partners used confidential government information to help private clients dodge new tax laws. Despite the severity of these breaches, regulatory bodies have been slow to enact stringent punishments, raising concerns about whether the government has the will—or the power—to reign in the big four’s misconduct.

Weak Legislative Oversight and Market Dominance

Government consultation papers have acknowledged the dominance of the big four, which control over 96% of ASX-listed company audits. This concentration of market power stifles competition, reduces choice for companies, and weakens the resilience of the audit sector, especially in cases of scandal or firm collapse.

Yet, despite these warnings, there has been little progress in terms of legislative reform. The Treasury's recent examination of the big four’s structure, professional standards, and governance has shed light on these issues, but the results are yet to translate into effective regulation. Whistleblower protection laws remain inadequate, and the firms' partnership structures allow them to dodge critical scrutiny and avoid being treated as “regulated entities” under the Corporations Act.

A Crisis of Government Oversight

The scandals of the past year—from PwC’s tax leaks to KPMG’s role in inflating NSW’s budget through an accounting gimmick—underscore the deep-rooted problems within these firms and the governments that rely on them. The TAHE scandal, where KPMG produced conflicting reports on the viability of a rail corporation to help maintain NSW’s AAA credit rating, is a stark reminder of the damage caused by government’s overreliance on private firms for public services.

Despite years of warnings and a growing list of scandals, the Minns government only recently introduced legislation to reverse the TAHE debacle and bring it back as a non-profit public asset. The fact that such a sham was allowed to persist for so long highlights the broader failure of government oversight and the urgent need for stricter regulations on consulting firms that handle public funds.

Will the Government Act?

While there are recommendations to tax the big four more appropriately and curtail their influence, the real question is whether government bodies will take decisive action or continue to be swayed by the lobbying and power of these corporations. The pattern of inaction suggests that, unless public pressure mounts, these firms will continue to thrive in the gray areas of the law, enriching themselves at the expense of taxpayers.

For now, the big four accounting firms remain a glaring example of corporate power unchecked by government control—a situation that calls into question not only the firms' integrity but the effectiveness of the regulatory systems designed to oversee them.