The Tax Office notices to produce eventually revealed that PwC had used confidential Treasury information obtained by former partner Mr Collins to design workarounds of the law to market to new clients.
“Uber received advice from PwC Australia on how to comply with its obligations under the Multinational Anti-Avoidance Law after the draft legislation was released,” an Uber spokesman told The Australian Financial Review.
“We had no knowledge the advice from PwC may have been based on information that was improperly obtained.”
Uber did not address whether it was the PwC client at the September 2016 meeting with the Tax Office, but the spokesman said: “We ended our relationship with PwC Australia as our tax adviser in 2016.”
A second PwC client, Facebook, owned by Meta, also distanced itself from the big four firm’s advice about the tax avoidance law.
“Facebook had no knowledge that any of the advice provided by PwC in regard to the MAAL was based on improperly obtained information,” a Facebook spokeswoman said.
PwC has previously said its clients “were not involved in any wrongdoing and no confidential information was used to enable clients to pay less tax”.
The structures are revealed in filings with the Australian Securities and Investments Commission, which also show the companies dumped the schemes, as part of negotiated confidential settlements with the Tax Office.
In an internal PwC email dated January 6, 2016, which was tabled by the Senate in May, an unnamed PwC partner described how the firm had booked $2.5 million in initial fees, after signing up 14 US tech companies to advise on the new laws. PwC has refused calls by senators to release the names of the 14 clients.
The MAAL, also colloquially known as the “Google tax”, was designed to target multinationals selling services or products into Australia from offshore offices in low-tax countries. It was announced in the federal budget on May 12, 2015, and the legislation was released four months later in September ahead of the January 1, 2016, start date.
The Tax Office became alarmed in 2016 over the speed that schemes to avoid the MAAL appeared and issued a series of taxpayer alerts starting in April that year.
In early September, Tax Office deputy commissioner Mark Konza stormed out of PwC’s Sydney office after partners explained a new structure under which an unnamed international client would bypass the MAAL entirely.
A taxpayer alert was issued on September 15 in connection with this new scheme, which involved a foreign multinational directing its Australian business through an offshore partnership, in which an Australian entity was a minor partner.
The Australian partner had no control over the operation and received little or no profits, but its involvement as a minority partner allowed the multinational to claim this was an Australian operation and thus exempt from the MAAL.
In an October 2015 submission to the Senate tax avoidance inquiry Uber Australia said it had created new jobs and donated $50,000 to charity but offered no details on tax payments.
On December 1, 2015, the US group incorporated Uber Pacific Holdings Pty Ltd, which then acquired a 10 per cent stake in three general partnerships registered in the Netherlands: Portier Pacific VOF, Rasier Pacific VOF and Uber Pacific VOF.
In a new technology services agreement issued in July 2016, drivers had to acknowledge that a Dutch company, Uber Pacific Holdings BV, was “a technology services provider that does not provide delivery services”, and that it was the “solely authorised partner” of the VOF Netherlands partnerships.
While these Dutch partnerships conducted Uber’s Australian business, Uber could say it had an Australian presence and thus was not caught by MAAL, even though Uber Pacific Holdings Pty Ltd had no control and minimal earnings.
Facebook, meanwhile, on December 9, 2015, set up a new local company, FCL Tech Australia, owned by FCL Tech Ltd in Ireland.
This appears consistent with another anti-MAAL scheme described by the ATO in which multinationals reversed previous arrangements and set up an Australian company as the distributor of services or products, while the foreign entity that actually distributed the services (from a low tax jurisdiction) was deemed an agent of the Australian company, again avoiding MAAL.
“Facebook did not seek advice from PwC on how to comply with the MAAL until after Treasury issued the draft legislation, which is why we were surprised to learn of PwC’s alleged conduct,” the spokeswoman said.
However, Facebook quickly reversed course and became one of the first multinationals to become compliant with the MAAL. Facebook Australia became a reseller of advertising inventory for ads booked by the Australian sales team.
On October 13, 2017, Facebook made a $31.3 million settlement with the ATO to cover disputes covering 2009 to December 2016, the first full year of MAAL.
Two days later, in what appears to be another settlement, Uber incorporated Uber Australia Holdings Pty Ltd (UBAH). The Netherlands partnerships subsequently transferred their business to the new local subsidiaries, Rasier Pacific, Uber Pacific and Portier Pacific.
Uber Australia went from reporting revenue of $18.2 million in 2015 before the MAAL, to $36.4 million with the offshore partnerships in 2016, then after the reset with the ATO the newly incorporated UBAH reported revenue of $595 million in calendar 2017. Tax payments rose more modestly, from $501,000 in 20125, to $953,000 in 2016 to $4 million in 2017.
It’s not exactly a tax bonanza. Last year UBAH reported $2.55 billion revenue from “contracts with customers” (by which it means Uber drivers), but after paying $1.14 billion service fees and $1.3 billion in administrative expenses its tax bill was just $14 million.
