I was asked to write some observations on the subject of accountants and morality yesterday as part of research being undertaken for a forthcoming bool. I am sure I am one of a number of commentators asked the same questions, and no doubt the book will be a while in coming so I thought I would share my answers here to fuel debate in the meantime.<\/p>\n
1.\u00a0\u00a0\u00a0\u00a0 <\/span><\/b>Do tax\u00a0professionals feel an obligation to serve pubic interest when advising their\u00a0<\/b><\/span>clients? \u00a0If so, how do they define public interest?<\/b><\/p>\n \u00a0<\/span>According to the combined tax professional\u00a0bodies\u2019 statement on the conduct of tax practitioners<\/span>[i]<\/a>\u00a0<\/span>there are five principles to which such persons should adhere. Four relate<\/span>solely to their relationship with their client and the fifth, and last, says:<\/span><\/p>\n [A member\u00a0must] comply with relevant laws and regulations and avoid any action that\u00a0discredits the profession<\/span><\/p><\/blockquote>\n The clarifying notes add remarkably little to\u00a0understanding except to make clear that this means a tax adviser should have\u00a0<\/span>nothing to do with illegal acts i.e. tax evasion or to abuse charitable purpose\u00a0<\/span>for tax reasons.<\/span><\/p>\n This guidance may be considered the optimal\u00a0standard to which professional accountants might aspire. In it the public\u00a0interest is not defined, or is seen as coinciding with that of the\u00a0practitioner, their professional body and their fee-paying client. Adam Smith\u2019s\u00a0<\/span>maxim of self-interest happening, by fortunate coincidence, to maximise general\u00a0<\/span>well being would appear to have been adopted by these bodies as the guiding\u00a0<\/span>principle of the public interest, which these bodies seem to think might only\u00a0<\/span>be over-ridden when required by statute in the form of anti-money laundering\u00a0<\/span>regulations (para 2.18).<\/span><\/p>\n It is reasonable to assume as a result that\u00a0most accountants have an under-formed or absent sense of what the pubic\u00a0<\/span>interest may be.<\/span><\/p>\n 2.\u00a0\u00a0\u00a0\u00a0 <\/span><\/b>Do the\u00a0relevant professional associations provide useful guidelines to their members The only guidance ion this issue is that\u00a0noted above by the joint professional tax institutes and bodies that represent\u00a0tax practitioners. This mentions the public interest just three times, all in\u00a0the context of anti-money laundering regulation, about which they say:<\/span><\/p>\n While this\u00a0is a mandatory regime, it also gives a structure for the assessment of the\u00a0public interest in a tax context, including which of the following should take\u00a0precedence, in a particular set of circumstances:<\/span><\/p>\n - The public\u00a0interest in reporting knowledge or suspicions of criminal activity to the\u00a0<\/span>authorities; or<\/span><\/p>\n - The public\u00a0interest in clients receiving advice in confidence.<\/p><\/blockquote>\n The advice provided is that \u201cTreasury\u00a0approved guidance\u201d is followed. In other words, an entirely legalistic approach\u00a0<\/span>is adopted and the possibility that any other issue, such as ethical\u00a0<\/span>concern,<\/span>\u00a0 <\/span>needs to be taken into account\u00a0<\/span>when deciding on an appropriate course of action is not referred to at any\u00a0<\/span>point.<\/span><\/p>\n It can be reasonably concluded that the tax\u00a0profession\u2019s approach is wholly commercial: that which is within the law may be\u00a0<\/span>undertaken by a tax practitioner without ethical concerns being considered so\u00a0long as \u2018that will not bring him or his professional body into disrepute\u2019 i.e.\u00a0<\/span>if confidentiality can be maintained no other issue need be considered beyond\u00a0<\/span>bare legality.<\/span><\/p>\n This means that in effect professional\u00a0associations provide no useful guidelines to their members on how to balance In my opinion the GAAR does not provide\u00a0useful guidance to tax professionals on the boundaries of the activities that\u00a0<\/span>they should undertake. This is because the GAAR relies upon what is called a\u00a0<\/span>\u201cdouble reasonableness\u201d test to determine what may, or may not be acceptable\u00a0<\/span>practice.<\/span><\/p>\n This \u201cdouble reasonableness\u201d test requires\u00a0HMRC to be able to show that the arrangements entered into \u2018cannot reasonably\u00a0<\/span>be regarded as a reasonable course of action\u2019. However, as a supposed taxpayer\u00a0<\/span>safeguard a panel of experts drawn from the tax profession is required to\u00a0<\/span>advise HMRC as to whether this this test has been passed or not, and it was\u00a0<\/span>deliberately stated by the GAAR\u2019s principle author, Graham Aaronson QC, that\u00a0<\/span>this was intended to be a \u2018high hurdle\u2019. So far it has been an insurmountable\u00a0<\/span>one: to date the General Anti-Abuse Rule does not appear to have been used. This\u00a0<\/span>is hardly surprising since the standard of reasonable conduct that must be met\u00a0<\/span>is that of a tax profession that defines reasonable conduct as anything that is\u00a0<\/span>not illegal, and by definition, any tax avoidance meets that criterion.<\/span><\/p>\n In other words, the General Anti-Abuse Rule\u00a0the UK currently has was designed to permit the tax avoidance that we currently\u00a0suffer, whilst providing a veneer of action that supposedly tackles it, without\u00a0there ever being risk that the action could achieve this supposed objective.<\/span><\/p>\n This is an open secret amongst the tax\u00a0profession, in which case the<\/span> General Anti-Abuse Rule is wholly\u00a0ineffective as a useful guide to conduct for tax professionals.<\/span><\/p>\n <\/p>\n <\/p>\n
\non how to balance their duty to the public against their duty to their clients?
\n<\/a><\/b><\/span><\/p>\n
\ntheir duty to the public against their duty to their clients. \u00a0<\/span>
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\n3. \u00a0Has the general anti-avoidance rule\u00a0provided a\u00a0useful\u00a0guide to\u00a0tax professionals?<\/b><\/span>
\n\u00a0<\/b><\/span>
\nI have a conflict of interests on this issue.\u00a0As an author of the General Anti-Abuse Rule as a consequence of being a member of the committee that drafted it, as well as being one of the fiercest\u00a0critics of that committee\u2019s work, I may not be wholly objective on the GAAR.<\/span><\/p>\n
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