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ATO launches legal action against accounting giant PwC
In an escalation of a long conflict between the “big four” and the Australian Taxation Office, the ATO has launched fresh legal action against accounting giant PwC.
Tony Zhang
The tax office filed paperwork in the Federal Court last week for a lawsuit against PwC and three other respondents – Brazilian meat processing company JBS Australia and subsidiaries JBS Holdco and Flora Green.
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ATO second commissioner Jeremy Hirschhorn would not comment on any specific case but said certain groups in Australia were using legal professional privilege (LPP) for the wrong reasons.
“The ATO is concerned that some [advisers] and taxpayers are making reckless or baseless LPP claims in an attempt to withhold facts and evidence from the [commissioner],” Mr Hirschhorn said.
“We are currently disputing LPP claims in a number of our cases in the large market sector. These cases are progressed in various ways and may involve independent review of claims, declaratory proceedings and penalties for false and misleading statements.”
The concern for legal professional privilege comes after the ATO failed to prosecute PwC last year for its alleged role in assisting Swiss mining group Glencore in moving $30 billion of international shares into offshore tax structures.
Lawyers Weekly understands this was a strategic legal plan, allegedly designed by PwC Australia as an accounting exercise, but much of the documentation was carried out by law firms – notably King & Wood Mallesons in Australia – which enabled Glencore to claim legal professional privilege.
This adds to the ongoing dispute between the ATO and big four accounting firms with Lawyers Weekly’s sister brand, Accountants Daily reporting that in a speech last year, the commissioner fired a warning shot to the big four which had systemic impacts on capital markets and therefore the ATO would respond more forcefully to creative tax advice in the sector.
“The big four, because of their sprawling size and importance to multiple areas of the economy, can no longer operate as though they were boutique firms,” Mr Hirschhorn, a former KPMG partner, said.
Mr Hirschhorn also sent a warning to “overconfident” advisers who assumed they were above the tax system.
“I would note that I have seen some advisers who seem to operate almost on the basis that tax is discretionary or for people who are not as clever as them or their clients,” Mr Hirschhorn said.
He said surveys by the ATO had found only 40 per cent of big businesses were believed to be paying the correct amount of tax, compared to 90 per cent of individuals.
