ATO accuses PwC of improper use of lawyers to conceal tax affairs

Accounting giant PwC has been accused of improperly using lawyers to provide tax advice to multinational clients for the sole purpose of invoking legal privilege to deny authorities access to documents during tax audits.

The Australian Tax Office launched a lawsuit against big four accounting firm PwC last June to challenge the firm’s use of legal privilege to deny access to crucial documents on behalf of its client, international meat processor JBS.

The ATO has been on a mission to stamp out the “reckless” and “baseless” use of legal privilege in tax matters, as the legal and consulting industries are becoming increasingly blended to provide multinational companies with packaged services.

The ATO has accused PWC of using inexperienced lawyers to invoke legal privilege to deny access to documents during tax audits.

The ATO has accused PWC of using inexperienced lawyers to invoke legal privilege to deny access to documents during tax audits. Credit:Ryan Stuart

Appearing before the Federal Court on Monday, Dr Suzanne McNicol QC, acting for the ATO, said PwC partner Glenn Russell had been retained on matters that were outside of his expertise or not strictly legal in nature in order to shield JBS’s affairs from authorities.

Dr McNicol used an analogy of a smorgasbord of food to describe PwC’s increasingly diversified business, where legal privilege could represent “glad wrap” that is used to envelope the accounting firm’s range of professional services.

“The glad wrap that goes over the platter is Mr Russell. And it’s attractive to the client because the glad wrap holds it all together and comes with the [legal privilege] covering,” Dr McNicol said. “In the meantime, the covering cannot be taken off by my client, the commissioner, who does not get an opportunity to see the platter, it’s opaque, and the range of smorgasbord of offerings.”

Dr McNicol said legal privilege applied “a cloak” to the entirety of PwC’s services, while “the purported lawyer has the baggage of a group of experts, beavering away in the background with complex tax consulting advice.”

Richard McHugh SC, acting for PwC, said tax advice was complex and required legal expertise and that JBS had engaged PwC for the primary purpose of legal advice. The suggestion that Mr Russell’s advice was irrelevant or used improperly was “baseless and should be withdrawn”, Mr McHugh said.

“If this was not written on the head of a multidisciplinary firm and was instead written on the head of a law firm, we wouldn’t be having this discussion. It would be unimaginable that it would be suggested that this was not legal advice,” he said.

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