TAX FEATURE: Are accountants equipped as 'moral guardians'? By Rebecca Benneyworth

The ICAEW had the opportunity to have me work with them on their ethics exam last year.

But, as with many other things, they screwed it up and abondoned the idea.

see details on

http://stopthemerger.blogspot.com/2005/12/chaos-at-icaew.html

So much for leading the profession!

The argument that an acccountant can leave the decision on whether a client can or should do a tax scheme or not is plan straight forwadrly wrong. In fact it is negligent.

One argument why this is so is on my blog where I argue that the duty to the client is fourth on the list of duties a practitioner has. Incidentally, only when all four conditions I list are met do I think that the prctitioner is acting ethically.

But there's another issue that I don't list there. That is that the client has a right (and I stress, a right) to be guided by the accountant in the decision they make as they have come to consult an expert. They cannot make an 'informed decision' without the guidance of the acountant (any more than 'informed consent' in medicine requires guidance from the doctor). No accountant can pretend they do not display their own value judgements in the way they explain themselves.

As such, of course the practitioner is a party to the decision of the client - and once more, no one should deceive ourselves by pretending it is otherwise. They are only fooling themselves.

I can only presume Alastair has not read my article, referred to below at www.taxresearch.org.uk/blog/

His argument makes no sense. Of course a court considers rules and law - but the issue we're discussing is not waht happens in court - it's about what an accountant does. And that's far removed from a court room - the closest to which most accountants get is to watch Judge John Deed.

And that's about as realistic as Alastair's argument (and much more fun).

Whatever next?

I like it Dennis :-)

Richard

Is not one of the principal differences between a professional and a technician, the fact that a professional is required as part of his service to exercise his individual judgment in doing his work, whereas a technician does not? As soon as he is not required to exercise judgment, he becomes a technician, performing his work mechanistically?

Being a member of a profession trains, enables and requires one to exercise that individual judgment and there may indeed be ethical questions that arise as part of that profession.

I will continue to exercise my individual judgment as part of my service as my position as a member of a profession and as my clients require me to do. I will not do or advise on anything illegal. I will not accept that my moral position is in any way compromised by comparison with that of others who might have advised differently in the same circumstances. And what I will emphatically not do is submit to badgering about morals from individuals whose beliefs (many of which appear to be religious or quasi-religious in nature) motives and agendas happen not to coincide with mine.

I always thought a mercenary was someone only interested in profit whereas a prostitute is someone who degrades talent for money.

It's a subtle distinction but no doubt one Mr Sartoris will appreciate.

missing the point. I mentioned William Gates in an earlier comment.

Let's say you have a family business and they save £20,000 by incorporating their business and taking low salaries and the remainder of their income via dividends.

Now this is all perfectly reasonable "tax avoidance", although I would consider that "tax avoidance" is a little strong a description in this case.

If you stop at this point, I get the impression that some people might call this morally wrong, as they have arranged their circumstances to reduce their tax bills.
Howver, these people are very morally inclined and decide to give £10,000 to charity. So it can be clearly seen that the tax issue has nothing to do with the morality of these good souls.

My point is that tax is just one facet of a person's life. You have to look at how they conduct their lives as a whole, before you can make any judgements about people's lives, if indeed you consider that you are entitled to make such judgements.

If you break the rules and go down the road of tax evasion, then this would be considered unacceptable.
It could conceivably be argued that it is immoral to pay too much tax, as at least if the money stays in our pockets, we are more likely to put it to good use, whereas the government has many ways of squandering the money and lining their own pockets (consider MPs pension schemes).
There is more to life than tax, and the best way to operate is to operate within the confines of the rules set down.
So I would consider that the answer to the initial query is : No, accountants are not equipped as "moral guardians", no more than anybody else. The only "moral guardian" is each individual's own conscience.

not only do I advise on things that I do not approve of, I have also advised people I didn't like, or didn't think much of at the time. All in a days work!

I am more picky these days, and won't act if I don't like the look of someone.

My job is to give the fullest and best advice. It is plain negligent not to do a proper job, and I feel that I could be laughed out of court if I claimed that I failed to give the right advice on ethical grounds.
I would add, that if you do feel that ethical or moral grounds exist then you should make this plain to clients at the outset. Let them decide.

Rebecca

I suggest that all laws (including tax laws) are a system of rules made by Parliament and the Courts.

Clearly you have no wish to do anything which would be in breach of those rules - but are you suggesting that you should make up some extra rules of your own (on moral grounds)?

If you make up some rules of your own, where do you stop?

Are you suggesting that your own rules would be OK if they result in you paying more tax, but not OK if they result in you paying less tax?

I believe that once you stray from the rules established by Parliament and the Courts you are dancing in quicksand!

I normally deal in criminal cases (usually not related to tax). There may be occasions when the Court - by strictly following the rules of law - comes to the 'wrong' answer. For example where a person is acquitted on a 'technical' defence. But "rules is rules" and, in my view, we should stick with them.

David
www.accountingevidence.com

To all commenters I have three words: Arthur Anderson + Enron.

Here we have the classic case of what happens to a truly great firm that was the benchmark for acceptable practice around the world being destroyed by a relative handful of renegade partners who interpreted doing the right thing as ...at any cost. The loss of the moral compass to which Richard refers is pivotal.

Fast forward to today. KPMG - which narrowly avoided Andersen's fate after 16 partners took it upon themselves to create what are now seen as fraudulent schemes has never dealt with the issue at the highest level.

ICAEW has deferred putting out an ethics paper for students while ACCA has effectively swiped the moral high ground by getting one in place for 2007.

Now tell me how you can logically divorce ethics and morality in the context of practicing? By definition, you have to be depraved in some way to ignore the ethical dimension because it is an ontological part of operating within a moral framework. When you can justify to yourself that tax doesn't have an ethical dimension, anything is possible. Get caught out, the consequences are dire for everyone involved.

Mitigate by all means. Use the exemptions that are available. But without an ethical dimension to the service you offer you are but one step away from justifying pretty much anything. That cannot be right for people operating in what they otherwise believe is a humane society.

...can someone please enlighten me as to whether a dividend is somehow more immoral than a salary given different rates of tax apply to each?

Are we also to conclude the self-employed population is somehow less morally virtuous than the employed population given they pay lower amounts of NIC and generally receive more preferential treatment of their expenses?

If we take the morality argument to its logical conclusion these questions surely demonstrate what a quaint absurdity it actually is.

...to me the moral ins and outs of my questions regarding dividends and self-employment I will gladly accept your argument.

For the time being however, I am simply suggesting that the level of tax one pays is in no way proportionate to either the moral standing of the client or the adviser.

Whilst we are at it though I have a further question. Are Porsche drivers more morally virtuous than Smart Car drivers given that they proportionately consume more petrol and therefore pay more fuel duty and will shortly also pay more road tax?

Ab initio a profession is just a group of people banding together in a restriction of trade that they hope will enable them to charge higher fees by cutting out the competition, and possibly earn them a little social kudos.

They only have "ethics" committees, because if they called them "rules committees", which is what they really are, people might confuse them with golf clubs.

Sometimes, as in medicine, they are seen to be a general good and come to be enshrined in law; sometimes, as in accountancy, one has to wonder . . . . . .

to a client, you have a duty to act in their best interests.

They will pay you a fee to do so, and they would probably consider it "amoral" if you were not to do so.

If you do not act in the clients best interests on the grounds of morality, then you may find you also have a little problem with your PI cover.

As regards the more complex tax avoidance schemes, these are unlikely to affect the smaller practitioners.

Additionally, the larger firms engaged in these, now have to disclose details concerning these schemes.

Historically, the UK government has allowed tax concessions to various groups of people, for political reasons. Where is your morality there?

Additionally, billions of pounds of VAT is being stolen, when this is a problem that could have been addressed years ago. Where is the morality there?

It is the small business and the ordinary working man who picks up the tab.

And finally, consider William Gates, computer geek. He has a few quid tucked away. I am sure he has been well advised taxationally speaking. But he does give quite generously to charity. Is he amoral also?

"Sadly, it appears that there are certain members of the tax advice profession who do not draw the line anywhere and will do anything for a fee.

Mr Rabbit may be one such."

Mr Rabbit is absolutely not one such - you had no evidence at all to draw that inference. In fact I don't advise on artificial or contrived arrangements at all, or only to advise clients not to undertake them when other firms suggest such schemes.

But I don't presume to impose my own sense of morals on others, because I don't regard it as my part of my duty as a tax adviser.

And I certainly don't regard it as valid to criticise the moral values of other professionals, unless they break the law or bring the profession into disrepute.

Patrick (and Rebecca) raise an interesting point here. Perhaps something that an inquisitive journalist might like to follow up with a Freedom of Information Act request on?

If only I had the time after helping clients through the maze of complex legislation we are faced with.........

David Nicoll

But all your arguments appear to have an excluded middle, and as a result have become as circular and indigestible as a dunkin donut.

In all that great quantity of verbiage you have not presented one solid axiom, one unquestionable and universally acceptable truth from which to argue that there is a common morality to which we should all unqestioningly and without exception adhere.

The man who says the government takes too much and it is his bounden duty to minimise those deprivations on his client's behalf is just as moral as the man who says that, like monks, we should surrender all but the absolute minimum needed to support life to the community. It's just that they have different personal bases for their morality.

So all we can do, whether we're technicians or professionals is read the law, try and interpret it, and advise our clients accordingly. And that is where it ends.

And whilst we may not practise in a Court of Law, it behoves us to remember that when push comes to shove, it is nowhere other than a court of law that our interpretations will be tested by legal argument in an adversarial system.

And just because a group band together and subscribe to a common rule (not necessarily a common morality) - that does not necessarily make them more moral than others, any more than it necessarily suggests that deep down they're too wimpish/lazy to work things out for themselves.

It just gives them a nice warm (possibly smug) glow.

If you don't give the client the option they can't make an informed judgement. If you deliberately withhold information from your client such that they can not make a judgement with as close to full information as possible then you are being negligent.

If you are being consciously negligent are you not by definition being unethical?

Once you have laid out all possibilities to a client I think it is perfectly fair to say, "I won't help you acheive route x because I find it morally/ethically distateful" and therefore discount it. However, discounting it before the client is even aware of it as a possibility on moral grounds is a recipie for a negligence claim.

Do those people who advocate not telling clients of all possibilities, let clients know at the outset that they will only provide advice in accordance with their own morals? What on earth do their engagement letters say?

If I learnt that any professional adviser of mine had been withholding similar information I would be furious. In my view denying a client information is utterly unprofessional not to mention the fact that by imposing one's own set of moral values you are inherently suggesting the individual is incapable of reaching a suitable decision themselves. Unprofessional and arrogant - surely the only words to describe such behaviour.

What a ludicrous piece of public hand- wringing. I've never seen so many moral somersaults in such a short piece of writing. On the one hand, on the other hand, on the left knee, on the right ear.... please, give us all a break. There is no morality in tax, only rules. Your clients expect you to work to the limit of these rules. In fact the only immoral act is failing to do so - while glady pocketing their cheque.

What is fair - that is the problem. Is that fair as in proportionate to effort (flax tax kind of things) or fair as in that everyone should have enough to live on regardless of effort. Is that fair as in a tax system which is proportionate to consumption.

Is that fair as in a tax system that favours those who will keep the party in power is considered 'fair' or otherwise.

Also, it could well be that, deep down, the UK government knows that if she annoys Greens et all, UK economy and jobs will suffer and hence it is better to leave them alone and collect the CT and the VAT (council tax, business rates) that runs into millions that they are paying.

As we cannot define fair fairly, let's stick to the rules and rules alone. If HMRC does not like the rule, change it and make it clear and stops trying fiddle or try to justify its action based on 'fairness'.

The Human Rights aspect interests me - the article states "Under the EU Convention on Human Rights, for tax to be legal it must be published so that all citizens know their obligations. Indeed there has been one case brought so far against a member state that did not make tax statute freely available to citizens – under which the particular tax was held to be illegal, and a breach of human rights."

How far does this go? Some years ago I became aware that there were "unpublished extra statutory concessions" (I do not know if these are still exist unpublished) which struck me as a somewhat undesirable state of affairs - if you are unaware of the concession how are you going to avail of it?? Would this breach human rights?

Similarly under statute the Board (HMRC) has discretionary powers in certain circumstances and it does not always make public its policy with regard to its exercise of the discretion. Therefore taxpayers are unaware as to whether or not such powers are being exercised on a fair and consistent basis and, where these powers are delegated locally, there can be no confidence that each Inspector is exercising that discretion on the same consistent basis as his colleagues.

Can HMRC secrecy be challenged under Human Rights?

Today was a good day: I picked up another profession - prostitute, without even passing any exams!

I expect soon to be damned by certain posters to rot in hell for all eternity - what a cesspool of moral turpitude tax advice is.

One lump or two vicar?

The debate has become confused because of the lack to distinguish beteen ethics, morals and values. When advising a client the accountant has an ethical responsibility to consider all possible effects including tax. If that advice has the consequence of reducing the amount of tax otherwise payable, it is the client who takes the decision (which might include moral considerations)not the accountant. If the client wishes to discuss morality I would suggest the accountant takes holy orders.
It is professional ethics that have become sullied by the mass marketing of extreme tax avoidance schemes. My antipathy to them is the reputational damage they do to the profession and the consequential anti-avoidance legislation they provoke.

Nothing in life is truly fair, accountants should advise to the best of their abilities, and I would suggest that this may at times mean advising on things that you do not agree with from a moral or personal standpoint.

For instance, you might advise on a big pension contribution to be able to claim maximum working tax credits, and then Yo-yoing income to take advantage of the income disregard. That is morally no better in my book than having been active in advising on EBTs, Film Partnerships or Oriental Carpets.

I will be continuing to advise what is permitable for tax within the law as we understand it.

1. A corner shop owner sellings sweets to a child;
2. A Ferrari salesman selling a car to a convicted drink driver; and
3. A tax adviser giving advice to a client on legitimate ways to reduce their tax bill.

I would be interested on your thoughts on which is the most immoral.

I've written quite a long piece in response to what Rebecca has to say here.

As it is long it's best to view at it at my blog

But the core of the argument is in the title, above.

And for those who argue there is no morality in taxation I have one simple comment to make - you are in denial of the reality of your working life.

So you advise on things you don't approve of Nichola?

I'm sorry, but I have to say more fool you. There's no obligation to do so. You always have the option of refusing to act for clients who want to extract the last pennyworth of tax relief. I have for over twenty years. It's been a sound commercial strategy.

But even if you think you must point out the possibility of doing something, you can make quite clear the client may chose to do it and you will have no part in it.

If you don't refuse you have compromised your own ethics. At that point, what are they worth?

I'd give up now if that was what 'professional' life demanded of me. Thankfully, that's not profesional life. That's technician life.

...it seems to me that everytime someone makes a legitimate comment expressing an opinion different to your own you figuratively 'shout them down' with personal comments which make a mockery of the debate.

This is not a competition to see who can 'shout' the loudest, nor need we all necessarily agree for the debate to be worthwhile.

If you have a valid response to comments this is the forum for it. If you feel you must resort to personal attacks to get your point accross I suggest this isn't the place for it.

This community can live without moral bigotry.

I'd remove that last post regarding Mr Rabbit, it doesn't do you any favours.

I have put a discussion of why profit maximisation is impossible and therefore choice of objectives is an essential element of business behavious on my blog at http://www.taxresearch.org.uk/Blog/2006/07/24/why-dont-businesses-profit-maximise/

Once the defence of tax minimisation as the inverse of profit maximisation as a necessity is detroyed ethics becomes an essential element in this debate, and if accountants aren't prepared for it then we're in trouble.

Richard Murphy.

Some other respondents are posting from the other side of the Wardrobe door.

...that the previous correspondent will keep an open mind about the possibility of ever being wrong in his ethical judgements.

Very professional! Very ethical!

...could a client place trust in the previous respondent when she admits she is prepared to advise against her own moral conscience?

As Richard Murphy has pointed out, you cannot just wash your hands of moral responsibility and say: "it is the client's decision, it is nothing to do with me".

You would never accept that argument from an expert who showed a terrorist how to make a bomb and said: " it was the client's decision what to do with the bomb, it is not my responsibility."

you might argue that your line of reasoning

"You would never accept that argument from an expert who showed a terrorist how to make a bomb and said: " it was the client's decision what to do with the bomb, it is not my responsibility."

is a bit tasteless given that it was the US Government who trained the young men as pilots before they flew those planes into the twin towers etc.

Does it really require moral judgement? Go and sit in a court of law for an afternoon. Pick a murder case. Listen to how the legal profession works, and reflect. I think you will see that the approach is adversorial. Its a contest. There is an accusor and an accused. There are several versions of the truth, some laws that are considere to apply, and for the most part a jury to decide on guilt, and a judge to control the proceedings and apply the law based on the outcome.

Now apply that to taxation. There is the law (complex, multi faceted, inconsistent, incomprehensible (for the most part). There are the facts, as interepreted by HMRC and the taxpayer, often in a different way.

There may have been a moral judgement when the laws were made, but after that it is rules and interpretation.

Wake up chaps, and get your heads out of that cloud.

...it is the prostitute's, not the professional's job to do whatever they are instructed to do for payment, even if they regard it as morally wrong.

But I understand that, even so, many will refuse to perform certain acts that they regard as repugnant. Not that I have any personal experience of such situations myself, of course.

Sadly, it appears that there are certain members of the tax advice profession who do not draw the line anywhere and will do anything for a fee.

Mr Rabbit may be one such. We must all pray that enlightenment may come to him and that he will one day repent and atone and thereby be saved.

I hate to see Horace Rumpole's reputation impugned. Certainly he would always defend those who had engaged in illegal or immoral acts but,if he had the opportunity, he would surely always advise them not to do it in the first place.

....all rejoice to learn (and from his own mouth too) that Mr Rabbit is so without sin (even without pride, self-regard, pomposity and boastfulness) and may therefore one day attain salvation.

Hallelujah!

...you have to and should do is explain your ethical concerns about the transaction to the client.

If they still insist on going ahead with what you regard as an unethical option, you have to tell them you cannot act.

The correct term for taking a fee for doing something you know is morally unacceptable is not "professional" but "prostitutional".

With all respect John, we are not obliged to put forward the ethics of the plan under consideration, merely to point out the risks along with the benefits.

We are professionals, it is our job to do what we are instructed to do. If the client demands that the advice rendered take into account ethical considerations then that is our brief, if they merely want advice on appropriate planning in connection with their affairs then that is the advice we should render.

I agree that if the client wants us to compromise our professional ethics, as set down by our respective bodies, then yes we must decline to act.

I prefer Rumpole's analogy, we are merely taxis for hire.

re your last post

"The correct term for taking a fee for doing something you know is morally unacceptable is not "professional" but "prostitutional"."

Are you suggesting that if we do it for free then it is suddenly ethical? I don't think your analogy stands up to scrutiny.

My understanding is that what prostitutes do is fine, but it is the charging for it that causes the problem - both morally and legally. You seem to be advocating that what tax planners do is not fine, whether they charge for it or not?

Given that a failure to provide the most tax efficient advice to our client will, of necessity, cause them economic loss. And given that such a failure, knowingly made, is highly likely to be excluded under PII cover (it is under mine), then are those who refuse to give advice happy to know that much of their work is therefore not insured? Or are they making regular declarations to their insurance providers to ensure that these situations remain insurable?

I would only add to what Richard Murphy says that it is necessary to apply moral judgment to nearly every aspect of human life and to every trade and profession, not just tax.

You cannot, as David Winch suggests, carve out a whole part your life and make it a morality-free area as though you were a moral Dr Jekyll outside the office but an amoral Mr Hyde at work.

....all be grateful to the penultimate and antepenultimate posters for their penetrating contributions to the debate and for their insightful comments about the real points at issue.

It is good to know we have such sagacious, high-minded and worthy contributors in "this community".

...the previous respondent is missing is that in order "to give the fullest and best advice" the ethical dimension cannot be ignored. It must be included in order "to do a proper job".

The alternative is not "to be laughed out of court for failing to give the right advice on ethical grounds". Rather, it is to say to the client: "I don't advise on that sort of transaction. I wouldn't do it myself and I don't think you should either".

No, tax is a game played by some of the best minds in the country. The only relevant morals are those of the people playing the game, for example to uphold the basis of trust that must exist between the profession and HMRC.

We are not expected to apply morals to our advice, we are expected to provide clients with options to minimise their tax liabilities based on legitimate grounds. It is then the client's decision whether to act on that advice.

In fact the moral question advisors should ask themselves is 'am I equipped to provide good advice to this client'.

I have read your article as it happens. I guess we will always disagree on this! Turning to your "Deed" analogy, it is of course a work of fiction, but it often deals with issues where the (fictional) Government indulges in politics in a way that is not morally upright. Is it just me that sees this as similar to the way in which (the non fictional) HMRC treats the tax legislation?

As it is not fair to "entrap" a person with a criminal record, but it is fair to "entrap" a personal who has no criminal record - who has the right to decide what is "morally rignt or wrong".

We have a lot of grey areas - cause by a really complicated tax system. Make the tax system simple and fair, and then maybe then everyone will be on the same play by the same rules. Morality has nothing to do with it.

My comments may not have been of the highest quality but at least I didn't write this:-

"john sartoris , 22 July 2006 @ 08:49 AM
We must...
....all rejoice to learn (and from his own mouth too) that Mr Rabbit is so without sin (even without pride, self-regard, pomposity and boastfulness) and may therefore one day attain salvation.
Hallelujah! "

i'll stop being silly when you do!