Tax Office mixed up documents in PwC penalty case

afr.com:

The Tax Office dropped part of the $1.4 million in penalties that it slapped on PwC last year because it mixed up some of the documents that it claimed were false and misleading, ATO second commissioner Jeremy Hirschhorn has told a Senate committee.

Mr Hirschhorn revealed the ATO mistake as he fielded questions over the settlement the Tax Office signed with PwC in March which halved penalties for falsely claiming legal professional privilege over tens of thousands of documents relating to five multinational clients.

Second Commissioner Jeremy Hirschhorn: “They were coming up in the system as documents, but they were things like logos, they were not really documents.” Alex Ellinghausen

The ATO has previously reported that 24 major corporations, many of them advised by PwC, made blanket claims of LPP, typically covering tens of thousands of documents in each case. Brazilian meat group JBS, which wasn’t part of the settlement, initially made LPP claims over 44,000 documents.

But Mr Hirschhorn said on Wednesday it was a “high bar” to show it was unreasonable for PwC to claim privilege for its clients, and so the ATO concentrated on 170 documents from five audits. But one in 10 of those documents had been mis-categorised by the ATO’s filing system and turned out to be logos or fragments of documents.

“The number of documents in play reduced because we took the view, the way we had counted documents was a bit unfair in relation to 17 documents, which were not really separate documents because they were coming up in the system as documents, but they were things like logos, they were not really documents,” Mr Hirschhorn said.

It is not clear why manual checks did not identify the mistake.

Deputy Commissioner Rebecca Saint said