Monday, August 07, 2023

Tax Office warned PwC chief Sayers to read the emails

 Tax Office warned PwC chief Sayers to read the emails

The Tax Office first raised its concerns related to the conduct of PwC’s tax division with Luke Sayers on August 29, 2019, when second commissioner Jeremy Hirschhorn urged the firm’s then-CEO to “personally review the internal emails”.

Former PwC CEO Luke Sayers (left) and ATO second commissioner Jeremy Hirschhorn. 

This was the first of three meetings between the two men detailed in a timeline of the ATO’s actions related to the PwC tax leaks scandal published late on Monday by the Senate.

The timeline provides new details of the years-long fight between the Tax Office and PwC executives over the actions of the firm’s tax division.

The Tax Practitioners Board ruled that a former partner in that division, Peter Collins, shared secret government information that was used by PwC personnel to advise clients on how to sidestep new tax laws.

The extent of the breach of confidentiality was revealed in May, when The Australian Financial Review reported on a cache of internal PwC documents showing dozens of partners and staff were involved the marketing Multinational Anti-Avoidance Law (MAAL) tax schemes based on information provided by Mr Collins.

The ATO timeline shows that at a second meeting, held on February 20, 2020, Mr Sayers discussed the upcoming election of PwC’s chief executive with Mr Hirschhorn, two weeks before the then head of the firm’s tax practice, Tom Seymour, was elected CEO of the firm.

During the meeting, Mr Hirschhorn advised Mr Sayers that it was neither the Tax Office’s role nor was it appropriate for the agency to comment on the firm’s election processes.

The timeline also states that Mr Hirschhorn told Mr Sayers that “the PwC board should ensure that it is fully abreast of the range of concerns the ATO has had with PwC Tax Group’s behaviour.”

A source at PwC at the time said yesterday that the first meeting between Mr Sayers and Mr Hirschhorn was to help resolve the tension between PwC and the Tax Office relating to issues such as the firm’s LPP claims and its aggressive tax structures.

The source said the second meeting involved Mr Sayers informing the Tax Office that Mr Seymour was likely to be the CEO. Mr Sayers relayed the Tax Office’s concerns about the firm’s tax division to the firm’s governance board, the sources say.

Labor senator Deborah O’Neill said that Mr Sayers either “ignored this advice, or the entirety of the PwC board failed to act on this information”.

“It is now beyond doubt that for more than five years PwC had knowledge that senior members of their tax practice had inappropriately misused government information in an attempt to benefit private companies.”

Mr Sayers, who is now president of the Carlton Football Club and the founder and head of the Sayers consulting firm, has previously said he was “not aware of the confidentiality issues that have since emerged within the international tax practice at PwC”.

The details in the 14-page response to questions by Senator O’Neill reveal that the ATO’s concerns about PwC’s tax division date back to August 29, 2016.

In this meeting with PwC tax partners and an unnamed client, the advisers confirmed that they were responsible for a scheme to sidestep the Multinational Anti-Avoidance Law (MAAL) using foreign partnership.

Uber restructuring

The Financial Review has previously revealed that Uber restructured its Australian operations through a series of Dutch partnership in December 2015, days before the MAAL came into effect.

Former deputy commissioner Mark Konza told the firm and its client that “structuring to avoid MAAL using foreign partnerships was seen as tax avoidance”.

The following day, Mr Hirschhorn met with PwC partner Pete Calleja, then the firm’s tax leader, and Tom Seymour, who was then the firm’s Asia Pacific Americas Tax Leader, to discuss his concerns about the firm’s MAAL scheme.

On September 19, 2016, the ATO issued a formal order for PwC to provide “information and documents” about six tax schemes it had marketed, include at least three related to the MAAL.

This began a battle between the ATO and PwC which ran from October 2016 and 2022 during which the firm claimed legal professional privilege over tens of thousands of documents in response to 16 “compulsory information gathering notices”.

The ATO contested the legal professional privilege claims and tested several of the claims in Federal Court.

By October 4, 2017, the Tax Office had become aware that PwC partner Peter Collins “was involved in MAAL consultation[s with Treasury] and may have shared information subject to confidentiality obligations.”

In August 7, 2019, the ATO formally advised “PwC that it [was] investigating the application of the promoter penalty laws regarding the marketing of MAAL schemes.”

Two weeks later, on August 29, Mr Hirschhorn held the meeting with Mr Sayers where he advised him to personally review the internal emails.

In September 12, 2019, Mr Hirschhorn gave a scathing speech to PwC tax partners where he warned them that the big four firms harboured a small number of arrogant partners who disrupted the tax system with overly risky advice which was a “systemic” tax risk.

‘Community expectations’

The following day Mr Seymour told the Financial Review that “community expectations” had changed about what was acceptable tax advice. He also said the firm would rein in the aggressiveness of its advisers.

On June 5, 2020, the ATO formally advised PwC that it had concluded its “promoter penalty laws review and would not take further action against the firm.

“Notwithstanding the conclusion of the review, the ATO raise several concerns” with the firm, the timeline states.

On July 2, the ATO formally referred Mr Collins for investigation by the Tax Practitioners Board.

More than two years later, November 21, 2022, the ATO told PwC it would apply a penalty against the firm for false LPP claims.

The ATO settled the penalty confidentiality on March 20, 2023, but did not inform the TPB or the Senate about this until June 5, 2023.

From March 14 of this year, senior tax officers, including Mr Hirschhorn repeatedly pressed the TPB to withhold a cache of PwC emails requested by Senator O’Neill.

“The settlement did not contain an undertaking or agreement to withhold information from the TPB or other agencies,” then ATO statement said. “Nor did it include an undertaking or agreement to influence disclosures by the TPB to the Senate.”

Edmund Tadros leads our coverage of the professional services sector. He is based in our Sydney newsroom.Connect with Edmund on Twitter. Email Edmund at
Neil Chenoweth is an investigative reporter for The Australian Financial Review. He is based in Sydney and has won multiple Walkley Awards. Connect with Neilon Twitter. Email Neil at