The federal police and the tax office jointly decided there was not enough evidence to launch a criminal investigation into the PwC tax avoidance leak back in 2018.
The Australian Taxation Office first caught wind of the confidentiality breach as early as 2016 when it noticed companies shifting their affairs around to avoid incoming multinational anti-avoidance laws.
Its investigation of the suspicious activity uncovered the potential breach of confidentiality by former PwC partner Peter Collins.
Mr Collins, who has since been referred to the Australian Federal Police as part of a criminal investigation, allegedly circulated Treasury information about new tax laws to drum up new business from clients interested in ducking the regulation.
During a series of parliamentary hearings, officials have been under pressure to explain why it took several years for the incident to come to light.
ATO commissioner Chris Jordan on Tuesday vented his frustration about several barriers that slowed the process down, including false claims of legal professional privilege.
The tax office then had to go after information that was clearly not covered by legal professional privilege, such as internal PwC emails.
It was also hamstrung by secrecy laws that stopped it from sharing information with other agencies and the treasurer.
"It's a necessary thing in 99 per cent of cases ... but clearly, this is an example where maybe we should have been able to disclose that at least to Treasury," Mr Jordan lamented.
The ATO boss said the agency did not have the power to launch a criminal investigation and instead referred the matter to the federal police in 2018.
After poring over the evidence for a year, which was indicative of an offense, the federal police and the ATO ultimately decided there was not enough information to launch a criminal investigation.
But the tax office's rapid action to crack down on the handful of multinationals trying to act on PwC's advice ultimately saved taxpayers $180 million in revenue a year.
"We are not afraid to take on the big end of town," Mr Jordan said.
"We have, and we will keep doing so."
ATO second commissioner Jeremy Hirschhorn said none of the 44 firms targeted by the multinational tax laws ended up adopting measures to circumnavigate them.
He said only two or three of those companies had already acted on the advice but they ultimately reversed their restructures.
The tax office is unable to reveal the names of the firms due to secrecy laws.
ATO officials were limited in what could be said in relation to the ongoing criminal investigation, as was Treasury Secretary Steven Kennedy.
Dr Kennedy said the emails tabled in parliament about the leaking of confidential information were "pretty disturbing" by any community standards and prompted Treasury to refer the PwC matter to police.
The consultancy giant has already kicked off an internal investigation into the incident and the broader culture at the firm, and on Monday, announced it was standing down nine partners. It recently announced the retirement of its CEO.
