It's been put to me that tax minimisation is required by professional ethics. I don't agree. There are two reasons:
1. Firstly, reasonable code of professional ethics would require tax minimisation by the profession. firstly because this projects an objective onto the client which they might not share, and that would be unethical; secondly because it is so obviously inappropriate for many people for whom the actions it requires would impose impossible burdens upon them and thirdly because it is an unattainable goal because proving the alternative hypothesis is in most cases impossible.
2. Secondly, despite all their massive limitations no current ethical code for the profession that I know of actually makes reference to this requirement.
So, why is an argument promoted that is wrong? Or is it that this is actually politics?
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I am not sure I can find anywhere that tax minimisation is required by professional ethics, and I think any such assertion would be foolhardy to say the least.
The Chartered Institute of Tax has the following to say in its guidance for members dealing with taxation (this is an excerpt only):
Tax avoidance is legal and is to be distinguished from evasion which is illegal. All taxpayers have the right to arrange their affairs under the law to minimise the liability to tax.
This is very different from promoting minimisation, it merely states that minimisation of tax liability is a right tax payers have, and rightly so in a democratic society.
Because of the many pitfalls in our tax legislation it is possiblefor the unknowing client to go down the wrong route and incur unecessary tax liabilities. Surely an accountant has to guide the client to the correct route otherwise:
1. He will be out of business as his client will
2. He is professionally negligent.
Surely tax minimisation is not just ethical it is part of the accountants business. Otherwise I am sure HMRC could oblige in pointing out what taxes to pay.
I believe there is a need for clear definition. We can claim to know the difference between planning, compliance, mitigation, avoidance and evasion. But with definitions that are rooted in law and supported by a well regulated ethics framework, there’s always room for interpretation. It is the interpretation that then becomes the argument, abstracted from the original intent. It’s a neat trick but one that requires attention – IMO.
Tax evasion and avoidance fit into three areas.
1. totally blatant illegal evasion.
2. very minor avoidance, which is immoral.
3. and the big area in the middle where evasion and avoidance merge, and not even the finance industry know which is which.
[…] Serious issues around ethics would start to evaporate. You can’t run this kind of business unless you’re doing the right things. Any whiff of being out of whack with that and you’re for the chop. That’s because of 1. […]