Australian Federal Police are investigating the improper use of information by the former PwC international tax head following a crime report by Treasury.

The confirmation came as the government raised concerns about legal constraints handicapping it from getting out of PwC contracts, after a now-former partner was caught sharing confidential tax policy information to drum up business.

AFP commissioner Reece Kershaw told a Senate hearing on Thursday he had received a referral from Treasury.

Treasury secretary Steven Kennedy confirmed on Wednesday night the referral related to PwC Australia’s former head of international tax Peter Collins who had “improperly used confidential Commonwealth information”.

“The emails that the Tax Practitioners Board tabled in parliament on May 2 highlighted the significant extent of the unauthorised disclosure of confidential Commonwealth information and the wide range of individuals within PwC who were directly and indirectly privy to the confidential information,” Dr Kennedy said in a statement.

AFP deputy commissioner Ian McCartney told the Senate committee an investigation had been launched.

PwC said in a statement: “We note the statement from the Treasury secretary and will continue to co-operate fully with any investigations into this matter.”

Home Affairs Minister Clare O’Neil said the actions of the consultancy firm were “a grotesque betrayal of trust” and was working to ensure its held to account.

But the minister said there were potential legal repercussions for dropping PwC from government contracts.

“We face legal constraints around existing contracts,” she told ABC radio on Thursday.

“We can’t break the law just because we’re the government.

“But we are doing everything we can to make sure there is accountability here.”

The partner shared Treasury information on measures to bolster tax laws, including rules stopping multinationals from lowering their tax bill by shifting profits from Australia to other jurisdictions.

PwC’s CEO has also stepped down and the firm has announced an investigation into its governance, culture and accountability led by former Telstra boss Ziggy Switkowski, who sits on a number of corporate boards.

Finance department officials are set to be grilled on how the government plans to respond to the scandal.

The government has taken steps to strengthen the Tax Practitioners Board to stamp out unethical behaviour and flagged further action, but has yet to detail what that will look like.

Finance Minister Katy Gallagher, who will appear at a Senate estimates hearing alongside officials in Canberra on Thursday, has described the behaviour at PwC as “outrageous”.

It seriously challenged the trust between government and such private sector firms, and the government would be seeking to reduce its reliance on consultants, she said.

The Greens want the government to ban such contracts.

Centre for Public Integrity research shows the volume of contracts with the “big four” consultancies – PwC, KPMG, EY and Deloitte – has surged 400 per cent in the past decade.

In 2021-22, the public service contracted $1.4 billion with the four firms.

On Wednesday, senators heard the attorney-general’s department was “having another look” at a contract with PwC for managing workflow.

– AAP