In last week’s corporate tax transparency data from the Australian Tax Office, you won’t find any data on four of the country’s biggest political donors and most influential policy advisers.
In recent years, the big four consulting firms — PWC, KPMG, EY and Deloitte — have quietly secured a key position in the soft corruption of Australia’s federal political system, exploiting the Coalition’s agenda of outsourcing of policy advice to secure billions of dollars in consultancy work while buying access and influence with millions in political donations and the hiring of former politicians and staffers.
Just this calendar year, according to the limited data available via Austender, KPMG has been handed $209 million in government contracts; Deloitte and PWC over $170 million; and EY around $80 million.
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Other major consulting firms have also enjoyed increasing government largesse, but on a different scale to the big four — McKinsey, for example, has secured “only” $23 million in contracts this year.
The big firms also benefit from the fact that the Commonwealth has refused to follow the lead of the NSW government, which has capped what it will pay consultants in order to try to extract better value for money from them.
Unlike companies that tender for government work, and even some other consulting firms like McKinsey, which operates in Australia via McKinsey Pacific Rim, the big four all use partnerships structures, meaning they are not subject to the same disclosure and taxation requirements as corporations.
The use of partnerships by the big consulting firms was explored last week by the Greens’ Peter Whish-Wilson as part of an inquiry into auditing regulation by parliament’s joint committee on corporations financial services. Whish-Wilson asked each of the big four why they preferred the partnership structure to a corporate structure and what implications that had for transparency.
Some noted that the joint and several liability structure, and the lack of limited liability protection, means that partners have an element of self-interest in making sure colleagues are providing high-quality audits. But they also admitted that the partnership structure means that the kinds of basics expected from corporations in terms of disclosure, such as related-party transactions, or external audits, aren’t required.
The big four occupy a systemically important role in terms of providing assurance to investors and regulators about the financial position of corporations. Increasingly, too, they’re playing a systemically important role in policymaking.
But the lack of transparency means that problems of a kind that would never occur if public servants were performing a task must now be factored in to public policymaking.
For example, a KPMG report that formed part of the contract between the Home Affairs department and Paladin was actually criticised by another big four firm, EY, because KPMG PNG had a business relationship with the company when KPMG was undertaking an assessment of its suitability.
The big four make another contribution to policymaking via millions in political donations. When asked last week about donations — funnily enough, only Whish-Wilson raised the issue of donations, given the big four generously fund both major parties — KPMG’s representative claimed that its donations (most recently, $212,000 in 2017-18) were simply “conference attendance fees” for conferences put on by “political parties where there are issues to be debated — where we want to contribute to a debate that’s being had. We feel we’ve got a lot to add.”
That makes it almost sound like some sort of public service, that KPMG would be willing to stump up the money to contribute to debate, that its political donations are just the price of participating in the marketplace of ideas.
The reality is that these are not “conferences” but party fundraising events where donors are able to purchase access to ministers and shadow ministers with the goal of influencing policy in the interests of the donors. And there is no transparency about the process — the parties don’t provide information about who bought access, who sat next to which frontbencher or what they talked about, nor do they provide information about follow-up meetings.
In order to avoid the already minimal transparency laws around political disclosures, both major parties are increasingly moving away from straight political donations — which KPMG is insistent it doesn’t make — to rely on subscription-style contributions that provide access to decision-makers at events but with fewer disclosure requirements.
That’s why virtually all of KPMG’s contributions are figures like $16,500, or $5500, or $33,000 — because they’ve had GST added to them to reflect that a good or service has been purchased, the service being the opportunity to lobby a frontbencher directly.
The big four all do it. They have become, per company, the biggest donors in Australian politics, displacing the banks and rivalling the gambling industry for the sheer bulk of donations. They influence policy via donations and meetings, they write policy via outsourced contracts, and there’s minimal transparency around how they do any of it.