Chinese ‘beef boss’ Zu Neng ‘Scott’ Shi owes ATO $163m

A Chinese beef baron who loved gambling, rubbed shoulders with Malcolm Turnbull and ripped off his own workers now owes the ATO $163 million.

Exclusive: He rubbed shoulders with then prime minister Malcolm Turnbull and as Australia Fuqing Association president was a leader of the Chinese community, but now Zu Neng “Scott” Shi is accused of the largest phoenixing scam in the country’s history.

The Federal Court has already found the Commonwealth is owed at least $163 million by eight companies controlled by Shi, known as the “Beef Boss” to his thousands of workers at 42 abattoirs across the eastern states.

An affidavit filed by the Australian Taxation Office with the court in its case against the Shi group alleges “phoenixing behaviour over a number of years”, such as workers being fleeced of their entitlements, tax evasion and asset-stripping.

PwC last year put the annual cost to Australia of phoenixing at up to $5 billion. The ATO has said it deprives the nation of funds for hospitals and roads.

Zu Neng 'Scott' Shi pictured alongside former Prime Minister Malcolm Turnbull.

At the same time as the ATO was investigating Shi, he was boasting on state-owned Chinese television of the Fuqing Association’s plans to build a school and health clinic in Sydney. Fuqing — pronounced ‘foo-ching’ — is a coastal Chinese city halfway between Beijing and Hong Kong.

The ATO’s investigations have also led it to take Federal Court action against Shi personally, and he recently consented to an order to pay $42 million in personal taxes and fines.

The ATO affidavit in the Shi group case alleged he gambled vast sums at casinos, mainly Sydney’s Star, withdrawing nearly $2 million from ATMs there over five years.

While that affidavit described Shi as the “single controlling mind” behind the companies, his wife Yu Qin Zhang and son Yun Feng “Michael” Shi have also consented to court orders that they pay nearly $14 million in personal taxes and penalties.

In April Melbourne-based Federal Court Justice Simon Steward ordered by consent that Zhang pay $3.1 million.

The Federal Court has already found the Commonwealth is owed at least $121 million by eight companies controlled by Shi.

In an affidavit filed in that matter, the ATO alleged she hadn’t submitted a return since 2006 when her disclosed earnings were just $13,800 — from cleaning work.

Michael Shi was ordered by consent to pay $10.7 million. His returns for 2013 to 2017 showed earnings of just $45,000 a year, according to the ATO affidavit.

The family’s lawyer did not respond to requests for comment.

When the personal debts are added to the group’s owing, the amounts top the $165 million Plutus payroll scam that came to light two years ago.

The ATO has had the eight Shi companies wound up.

Federal Court Justice David Yates made that order in November last year, saying he “revenue of the Commonwealth was … at substantial risk.

“This was particularly so given the flow of the defendants’ liquid assets to Mr Shi, his relatives and/or associates, including by transfer offshore to entities either controlled by or associated with him,” Justice Yates said.

Shi is known as the “Beef Boss” to his thousands of workers at 42 abattoirs across the eastern states.

He said the evidence showed $43 million had been sent overseas.

Justice Yates found the “the unpaid primary tax liabilities of the Shi Group exceed $121 million”.

The legal action to recoup the money is ongoing.

The companies’ combined revenue was $349 million from 2008 to 2017 with at least 1100 workers employed annually, according to ATO audits filed with the court. Their main contracts were with meatworks in NSW, Victoria and Queensland.

The companies have been run by FTI Consulting since the winding up order. Its head of restructuring Paul Allen said it had secured “ongoing employment of the employees with those abattoirs.”

Shi was not a director of any of the companies, but was the “controller of all”, according to the affidavit filed by the ATO in its case against the group. The document also claims seven of the eight companies had directors who were Shi’s relatives.

The Federal Court last month ordered the group be liquidated. FTI’s Mr Allen said it was “still determining the amounts owing to all employees including superannuation and other entitlements”. Some workers also had rental bonds deducted from their first pay slip.

ATO audits found Shi, his wife and son “and/or their associates own and control” three companies in the British Virgin Islands — widely recognised as a tax haven.

The ATO audits of the Shi group began after a tip-off from Liberal senator for Tasmania Eric Abetz in February 2014.

According to the ATO affidavit in the case against the family, the audits found Shi, his wife and son “and/or their associates own and control” three companies in the British Virgin Islands — widely recognised as a tax haven.

In the ATO’s only public comments on the case, deputy commissioner Will Day said it would “take determined action where we suspect complex and sophisticated schemes designed to rip-off employees and evade tax in Australia”.

Mr Day said the ATO would refer “matters to other Commonwealth agencies as appropriate”.

In 2017, state-owned Chinese TV aired a feature on Shi that began by saying his workers called him the “Beef Boss” and that Shi worked in a furniture factory in China before coming to Australia in 1989. In another Chinese-language media report he said he arrived in Sydney with just $50 in his pocket.

The TV story said he got a job woodworking for an Italian furniture business then started his own with a friend, growing it to three factories and eight stores.

The ATO audits of the Shi group began after a tip-off from Liberal senator for Tasmania Eric Abetz in February 2014.

But in the year 2000 their furniture style went out of vogue and the business failed. So he moved into the livestock industry.

The feature claimed he imported $100 million of meat into China annually and controlled 140,000 hectares of grazing land.

The TV story referred to his presidency of the Fuqing Association and its plans for a hall, as well as education and medical facilities.

News Corp Australia does not suggest the association has done anything wrong. Shi was its president but he may no longer be connected.

Mr Turnbull was photographed with Shi a month after becoming PM in 2015. News Corp Australia does not suggest Mr Turnbull had any knowledge of Shi’s alleged tax dodging.

Meanwhile, Australian authorities are investigating a global financial institution suspected of aiding tax dodgers in hiding income and assets.

It is one of a dozen complex international probes in which the Australian Taxation Office and Australian Criminal Intelligence Commission are collaborating with counterparts from Canada, the Netherlands, United Kingdom and the US as part of a new organisation called the J5.

The ATO’s Mr Day, who is one of the chiefs of the J5, told News Corp Australia that the group is expected to be able to go public with detail of its work in about six months.

By sharing information on cross-national threats such as cybercrime and cryptocurrency, as well as tapping into each nation’s expertise, the J5 has been able to speed up investigations that were already underway when it came into being 12 months ago.

It has also been able to open cases that were previously considered beyond the capability of a single country’s authorities.

Speaking from a meeting of the J5 in Washington DC, Mr Day said Australia would host the group’s next gathering in February next year.

— additional reporting by Storyful’s Josie Harvey

Originally published as Chinese ‘beef boss’ Zu Neng ‘Scott’ Shi owes ATO $163m