This week in tax: PwC Australia ‘failed to take ATO seriously’
PwC publishes detailed accounts of its behaviour in the tax scandal in Australia, while another tax trial looms for pop star Shakira.
PwC Australia has revealed that the Australian Taxation Office told the firm in August 2019 it was conducting a Promoter Risk Review in relation to the firm’s advice to certain clients in connection with the Multinational Anti-Avoidance Law, which was introduced in 2015, but that it failed to take the tax authorities seriously.
The disclosure was in a series of PwC reports published this week as the firm continued its investigations into a scandal surrounding breaches of confidentiality arising from the participation of several PwC partners in discussions with the Australian Treasury and the ATO regarding possible domestic and international tax policy changes over the last 10 years.
At the same time, PwC unveiled an action plan in response to its publication of a so-called statement of facts about the affair and a review of its internal culture, which was led by Ziggy Switkowski, former chief executive of Telstra, a telecommunications company.
As part of the action plan, the firm will apply Australian Securities Exchange Corporate Governance Principles and Recommendations, where possible, as well as appoint at least three non-executives (including a non-executive chair) to its governance board, and publish comprehensive, audited financial statements by September 2025.
“These actions form a critical part of our response to the revelations of unacceptable breaches of confidential information in parts of the firm’s tax practice,” the firm said in a media release.
The string of confidentiality breaches in its tax practice began many years ago.
The firm admitted that, in 2016, a partner forwarded documents related to a confidential consultation with the Treasury and ATO officials regarding the GST treatment of digital currencies to colleagues who had not signed a confidentiality agreement.
Another partner is accused of sharing confidential information from a Treasury group called the Tax Treaties Advisory Panel on several occasions.
Partners of the firm breached another confidentiality agreement by sharing a draft OECD report into profit shifting with colleagues while they were members of the BEPS Tax Advisory Group, which the ATO convened in 2013 from professional services firms like PwC, law firms, and corporate heads of tax.
The firm admits that once the Tax Practitioners Board established a formal inquiry into the scandal in 2021, it should have launched a “rigorous internal investigation” into what happened but did not do so until this year.
In a statement released alongside the report, PwC Australia’s chief executive, Kevin Burrowes, said “we are sorry”.
“We take full accountability for our shortcomings and the culture in our firm that allowed them to go unchecked over time,” Burrowes said.
Another tax trial looms for Shakira
The Spanish tax authorities are not finished with Shakira. They have charged the international singing superstar with evading further taxes – and that is even before the Colombian goes on trial at the end of this year.
Now, prosecutors are claiming that Shakira should have paid an extra €6.1 million ($6.4 million) in tax on income earned in 2018.
The forthcoming trial, which starts on November 20, is on charges of evading €14.5 million in taxes. The basis of that case, the authorities allege, is that Shakira was living in Spain between 2012 and 2014. Her defence is that she earned most of her income from international tours during this time before becoming a Spanish resident in 2015.
Income from Shakira’s El Dorado tour, sales of intellectual property rights and of real estate and financial assets are central to the latest set of charges. Prosecutors allege the singer used offshore companies to underpay taxes on the income raised from these activities. EFE, a news agency, is reporting that approximately $6.6 million in tax and interest is at issue.
Billions at stake in US Supreme Court tax case
A new report from the Institute on Taxation and Economic Policy and the Roosevelt Institute claims that the decision in Moore v United States, which some have described as the most consequential tax case to reach the US Supreme Court in decades, could result in $271 billion in tax breaks for almost 400 multinational corporations.
The case is due to come before the court in its next term, starting in October.
The ITEP/Roosevelt data singles out five companies in particular that could benefit if the court rules that the Mandatory Repatriation Tax, a key issue in the case, is unconstitutional. These range from Apple, which could be due $37.3 billion, to Google, which could receive tax breaks worth $10 billion.
If the decision goes this way, it would be “possibly the costliest Supreme Court decision of all time”, said Matt Gardner, ITEP senior fellow and co-author of the report, released on Wednesday, September 27.
“It would be hard to identify a less deserving set of tax cut beneficiaries than the companies that would reap at least $271 billion from repealing this tax,” he added.
Claims for R&D tax relief on the up in the UK
Businesses in the UK claimed an estimated £7.6 billion ($9.3 billion) in total R&D tax relief for the 2021-2022 tax year, according to the latest statistics released by HM Revenue and Customs yesterday, September 28.
This represents a year-on-year increase of 11% and corresponds to £44.1 billion of R&D expenditure, 8% higher than the previous year.
The three most prolific sectors were information and communication, manufacturing, and professional, scientific and technical, which accounted for 62% of total claims and 67% of the total amount claimed.
“At face value, more R&D expenditure is good news for the economy,” said Jenny Tragner, director and head of policy at ForrestBrown, an R&D tax credit consultancy.
“More than two thirds of the total relief was claimed by companies in three sectors typically known for their innovation intensity … suggesting that, despite its challenges, the government’s flagship innovation tax policy is delivering in the right areas,” Tragner added.
Tax lawyer takes on TMT co-leadership role at Dentons
A lawyer who specialises in the taxation of the digital economy has joined Dentons as co-head of its Europe technology, media and telecommunications group.
Amsterdam-based Wesley Boldewijn will lead the group alongside Karol Laskowski, a partner in the intellectual property, data and technology practice, who works from Warsaw.
Boldewijn advises clients on Dutch, European and international taxation issues, with a special focus on the taxation of the digital economy. He also focuses on corporate tax, the tax structuring of M&A and investments, tax treaty application, tax policy, and tax litigation.
“With all eyes on technology and its impact on the world, it’s an exciting time to be taking on this role,” Boldewijn said.
Next week in ITR
We will be bringing you more exclusive content on what was said by key industry players at both ITR's Global Transfer Pricing Forum Europe and the Managing Tax Disputes Summit, which took place this week.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.