Two reports have come to my attention that highlight just how the world really sees the accountancy profession. The first was from Reuters, yesterday and said:
BRUSSELS (Reuters) - European Union finance ministers agreed new measures on Tuesday to force accountants and banks to report aggressive tax schemes that help companies shift profits to low-tax countries.
The second was from the OECD in the last few days:
Responding to a request of the G7, today, the OECD has issued new model disclosure rules that require lawyers, accountants, financial advisors, banks and other service providers to inform tax authorities of any schemes they put in place for their clients to avoid reporting under the OECD/G20 Common Reporting Standard (CRS) or prevent the identification of the beneficial owners of entities or trusts.
As they noted:
[T]here are still persons that, often with the help of advisors and financial intermediaries, continue to try hiding their offshore assets and fly under the radar of CRS reporting. The new rules released today target these persons and their advisers, by introducing an obligation on a wide range of intermediaries to disclose the schemes to circumvent CRS reporting to the tax authorities. The new rules also require the reporting of structures that hide beneficial owners of offshore assets, companies and trusts.
The sad fact is that accountants cannot be relied on to be compliant with the law without measures being specifically targeted at them.
Every time an accountant says that the ethical codes of their profession are enough to ensure high standards just remind them of this.
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As the old City joke goes, ‘ethics is a county East of London’
For accountants as for too many lawyers and financial institutions, it is now all all about the letter of the law with no sense of the spirit. That in turn leads to an approach which is all about gaming the system, whether we are talking about tax evasion or nefarious banking practices. Ever more complex regulations or even fines will never compensate for fundamentally flawed ethics and values
Agreed
I was born in that county…..
“I was born in that county……..”
Where, Ethics ? I thought you were Irith. 🙂
I have an Irish passport
I was born in Essex – where my parents happened to be at the time
I was born in Essex — where my parents happened to be at the time. Most people find it convenient to be born proximate to at least their mothers. 🙂
It helps
I was remarkably near my twin as well, for the record
“I was remarkably near my twin as well, for the record”
What an astounding coincidence. What are the odds of that I wonder.
He’s tried to deny it ever since
I jest!
For the mathematicians here, I’ve pictured ethics vs regulation as 2 opposing exponential curves. As the level of ethics tends to zero, regulation tends to infinity. Diminishing standards of ethics require exponentially more regulation. Conversely, in a world of perfect ethical standards (imaginary I know), no regulation would be needed as one could trust organisations, private or public, to make the best decisions in the wider interests of the public and society.
There is a sweet spot in the middle where the curves cross, where only modest levels of regulation are needed as organisations can mostly be trusted, and one could probably point to organisations or sectors where that is the case, even now.
Too often we have the worst case where high levels of regulation have become necessary in an effort to tackle unethical behaviour. That is costly for both organisations and regulators, and ultimately the customers or beneficiaries. It also is doomed as people game the regulations.
It’s a vicious spiral and hard to reverse. A study of how countries such as Zaire slide into corruption shows how hard it is to undo once it becomes embedded. Parts of our economy and society are not so different to places we frequently condemn. I’d recommend any of Michaela Wrongs books on Africa – then reflect on what we might learn about our own economy and institutions
It’s an explanation I can readily relate to and agree with
Thanks Robin
Robin,
Good post. I do fear corruption is near impossible to remove from a society once it becomes established. I’ll be taking a look at your recommended reading.
Big fees trumps small ethics.
Adam – try Our Turn to Eat, about Kenya, and In the Footsteps of Mr Kurtz, about Zaire and Mobutu. Especially good if you have an interest in Africa. Michaela Wrong clearly knows and loves Africa, and is not from the school of cynics who Just think that Africa is irredeemably corrupt. The messages could apply anywhere