Tax office says PwC secretly paid a fine for its attempt to withhold requested documents

The ATO has told a parliamentary committee it enforced a fine against PwC over the aggressive use of legal professional privilege to block the release of documents.

The ATO says PwC paid a fine, although the size of it has not been revealed.

A previously secret settlement between the Australian Taxation Office and PwC Australia resulted in the consulting and audit giant paying a fine over its attempts to restrict access to documents despite being criticised by a court in 2022 over a similar practice.

In response to questions from the Senate committee investigating the use of consultants by the government, the ATO confirmed it had reached a deal with PwC in March this year.

The ATO said PwC had signed two enforceable voluntary undertakings with the tax office since 2012.

However, it noted these undertakings were not settlement agreements “as they do not bind the commissioner to take action or to refrain from taking action”.

The response comes after PwC revealed, in response to questions in the NSW parliament, that it had signed a peace deal with the tax office.

The ATO told the Senate committee the settlement signed in March concerned penalties levied on PwC for making “false and misleading statements” in response to compulsory demands for information.

“The settlement did not relate to the breach of confidentiality matters investigated by the Tax Practitioners Board,” the ATO said.

“The settlement has been reviewed by an ex-judge as part of the Independent Assurance of Settlement process.”

The ATO said the former judge “concluded that the settlement was fair and reasonable for the Australian community” but sources have told The Australian PwC was able to dodge a far steeper fine after negotiating with the tax office.

“Relevantly, the reviewer concluded that the settlement was conducted fairly and properly and was consistent with legal principles,” the ATO said.

The peace deal signed between the ATO and PwC came weeks before the tax scandal enveloping the firm exploded after parliament published 144 pages of emails showing the misuse of confidential information.

PwC chief executive Tom Seymour resigned in the wake of the publication of the emails.

The revelation comes despite the ATO appearing before parliament in May.

Neither ATO Commissioner Chris Jordan nor second commissioner Jeremy Hirschhorn revealed the tax office had signed a deal with PwC.

However, Mr Hirschhorn told parliament at the time the ATO was concerned about PwC’s attempt to frustrate investigations into the firm through “false LPP claims”.

“We had to issue further notices to obtain information that was clearly not subject to LPP, such as internal PwC emails,” he said.

“Despite our best efforts, due to the obstacles placed in our path it took a long time to obtain the information requested.”

Greens Senator Barbara Pocock said the disclosure of the deal was “symptomatic of the secrecy that surrounds the relationship between PwC and the tax office”.

“The details of this settlement should be made public and if they can’t be for legal reasons it is an indictment on the way the ATO manages it affairs,” she said. “How can these agencies be accountable to taxpayers when we can’t see the details of their dealings?”

Senator Pocock said it was “perplexing” the ATO did not divulge the settlement when appearing in May.

“The ATO had every opportunity to come clean about their dealings with PwC and they chose to keep this information to themselves presumably, in the hope that it would not come to light,” she said.

The ATO and PwC have repeatedly clashed over the firm’s attempts to claim legal professional privilege. The tax office’s attempt to investigate the firm’s former head of international tax, Peter Collins, has been delayed through repeated fights over documents.

Mr Collins was banned as a tax agent for two years by the Tax Practitioners Board after it was found he shared confidential information from Treasury briefings over plans to reform Australia’s tax laws in order to make big corporations pay more.

In mid-2022 the Federal Court again found many documents PwC was seeking to make a claim on, in relation to its client meat processing giant JBS, were not privileged.

An ATO spokeswoman told The Australian while all its settlements were confidential the tax office aimed to “be as transparent as the law allows us to be”.

“Settlements are an important element of the administration of the tax system because they provide a cost effective and fair way to resolve disputes and lock in future compliance,” she said.

Originally published as Tax office says PwC secretly paid a fine for its attempt to withhold requested documents