(Image: Zennie/Private Media)

The coverage of the PwC tax leak scandal and its continuing aftermath in The Australian Financial Review — which broke the story — has been outstanding, with Edmund Tadros and Neil Chenoweth scoring hit after hit. Today Chenoweth has another exclusive that should be every bit as consequential as previous revelations.

He revealed that the Australian Tax Office (ATO) reached a settlement with PwC in March — long after the firm’s involvement in the tax leak scandal was publicly known — over PwC’s false claims of legal professional privilege that gave the big rour firm a 50% discount on applicable penalties. As part of the deal with the ATO, PwC didn’t have to admit any liability.

The deal was not revealed until PwC admitted one existed in evidence to the NSW parliament inquiry into consultants last week, and the ATO confirmed it.

It forms part of a continuing pattern of obscurantism by the ATO in relation to its secret dealings with both PwC and large firms — including attempting to thwart efforts by the Tax Practitioners Board, which revealed the PwC leak, to provide documents to the Senate.

False claims of legal professional privilege have been a continuing feature of PwC’s efforts to help corporations avoid paying tax in Australia. The ATO has made a point of challenging the practice, with some success. Why it settled what appears to be an open-and-shut case involving false claims of privilege between PwC and the corruption-riddled Brazilian meat firm JBS isn’t clear.

“The ATO cannot litigate all disputes,” Chenoweth quotes an ATO spokesperson as saying.

What’s become clear from the PwC saga, and is confirmed by today’s revelation, is that the ATO has a deep hostility to transparency about its dealings with large firms, and prizes its ability to make secret deals — which it believes encourages multinational firms to settle tax disputes rather than go to court — above all else. It extends this hostility to Parliament itself, not just the public, and is willing to aggressively challenge other bodies if they do anything to threaten the veil of obscurity the ATO likes to draw over the exercise of its powers.

But the deal between PwC and the ATO over JBS would seem to confirm that the ATO’s resistance to any scrutiny of its settlements is misplaced. What part of such a deal wouldn’t have set alarm bells ringing? Letting a scandal-plagued firm off with a 50% discount and no liability? The involvement of a notoriously corrupt Brazilian multinational?

This looks like the exercise of power in exactly the way that many people alienated from our political and economic system think power is really exercised — in secret, to the advantage of large, well-connected firms, by government bodies run by people with their own history in the private sector.

While Chris Jordan’s stint as tax commissioner has mostly been a successful one, the PwC scandal has exposed a truculence toward transparency on the part of the ATO under him that might end up overshadowing his legacy.

After every new revelation, the questions grow larger — what else don’t we know about what has gone on between the ATO and the big four, especially PwC? And after every new revelation, the case for some kind of powerful inquiry with full powers to shine a light inside this consultant-created cavern grows.

Should there be an inquiry into the ATO’s secret deals? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.