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ATO launches legal action against accounting giant PwC, meat processor JBS

ATO second commissioner Jeremy Hirschhorn would not comment on any specific case but said certain groups in Australia were using legal professional privilege for the wrong reasons.

“The ATO is concerned that some advisors and taxpayers are making reckless or baseless LPP claims in an attempt to withhold facts and evidence from the Commissioner,” Mr Hirschhorn said.

“We are currently disputing LPP claims in a number of our cases in the large market sector. These cases are progressed in various ways and may involve independent review of claims, declaratory proceedings and penalties for false and misleading statements.”

ASIC documents show Flora Green is a subsidiary of JBS Australia registered as a foreign company with a company address in Wacol, Queensland.

Mr Hirschhorn said in a speech last year the big four accounting firms had systemic impacts on capital markets and therefore the ATO would respond more forcefully to creative tax advice in the sector.

He said surveys by the ATO had found only 40 per cent of big businesses were believed to be paying the correct amount of tax, compared to 90 per cent of individuals.

“I have seen some advisers who seem to operate almost on the basis that tax is discretionary or for people who are not as clever as them or their clients,” Mr Hirschhorn said.

The ATO said in a separate research note it was investigating accounting firms excessively using LPP to withhold facts or evidence or to make false and misleading statements that could conceal fraud or lead to tax evasion.

A 2018 report by the ATO found 722 out of 2109 large companies operating in Australia did not pay tax in the previous financial year even after making a gross profit. The Multinational Anti-Avoidance Law came into effect in 2015 to counter the erosion of Australia’s tax base by multinational companies exploiting loopholes to avoid paying tax on profits.

JBS is one of Australia’s largest meat processing companies and last month it was forced to close its Dinmore processing plant after two of its Queensland abattoirs were suspended from accessing the China market. In 2014, the company bought ham, bacon and small goods producer Primo Smallgoods for $1.45 billion.

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