Accountants should make a similar ethical standard pledge to the medical profession, according to Labour’s shadow chancellor John McDonnell, who has called on large firms to force their employees to take a Hippocratic Oath.
McDonnell aimed his ire at the Big Four, who he believes are not doing enough to tackle tax avoidance. Speaking at the World Economic Forum in Davos last week, McDonnell told the BBC that the Big Four must change their “entire ethos”.
"I think we need a new Hippocratic Oath for [the accountancy firms], where they sign up to being committed to tackling tax avoidance themselves, rather than coming up with all these bizarre schemes to enable that to happen," McDonnell said.
He added that the public is tired of seeing “increasingly complex schemes being cooked up by accountancy firms with a direct interest in obscuring and hiding the earnings of their clients”.
McDonnell has consistently opposed tax avoidance throughout his tenure as shadow chancellor. In the party’s 2017 general election manifesto, McDonnell said a Labour government would pledge £6.5bn towards a tax avoidance programme and another area of the party’s manifesto that garnered attention was its vow to outlaw umbrella companies.
‘Hippocratic Oath is the wrong request’
But some corners of the profession diagnosed McDonnell's proposal as absurd. “Almost no doctor has ever taken the Hippocratic Oath,” accountant and tax campaigner Richard Murphy told AccountingWEB. "It's the wrong request."
As the husband of a GP, Murphy attests that while no doctor has signed up to a Hippocratic Oath they are heavily regulated, removing the need for such a pledge. However, what is required in the case of the accountancy profession, Murphy added, is a partnership between the taxpayer, their agent and government to make tax compliance easier.
“The government has a duty to make it as easy as possible for the taxpayer to be compliant and I don't think it always does that, and I think that requires a review of the tax system, including simplification which so far we are not seeing.”
Professional bodies react
While McDonnell wants large firms swearing to the accounting equivalent of Apollo the healer, ICAEW’s chief executive Michael Izza reasoned that such ethical standards have been a “central pillar” in the profession since accountants were granted their Royal Charter nearly 140 years ago.
Responding to McDonnell’s comments in City AM the ICAEW chief wrote: “In addition to being subject to legal requirements, chartered accountants and members of other professional accountancy bodies are also required to follow a professional code of ethics.”
In particular, Izza highlighted how members of the seven professional bodies must already abide by the Professional Conduct in Relation to Tax (PCRT), which HMRC recently used as a framework for its Standard for Agents. "This code, which enshrines fundamental principles like integrity and objectivity, is regularly updated to reflect changes both to the law and the expectations of society."
He concluded that McDonnell should first root out the wrong rather than "those who have been working hard to do what is right", pointing out that a third of registered tax advisers are not required to follow any ethical or professional standards because they are not members of any professional body.
Professional bodies must do more
But for Murphy, Izza’s PCRT response to McDonnell “missed the point”. For a code of conduct within the profession to work it requires a serious change of view from the professional bodies, he said.
“There is no doubt that over the years many firms of accountants have run into trouble, not always in the UK but worldwide, with regards to their professional ethics on tax.
“Many UK-based firms are operating in tax havens where frankly the question arises what they are doing there, why they're there, what it is their clients may be trying to achieve by being there, and whether that activity is consistent with paying the right amount of tax at the right place and at the right time.”
McDonnell should be focussing on where advisers create risk for their clients, Murphy said, not sensible tax planning that is fair and square with the law. "The accountant's job is to actually present a fair minimum risk to their clients. That to me is the equivalent of 'do no harm'.
“By all means mitigate tax liability within the law, but don't create tax risk. I am aware that schemes are not nearly as prevalent as they were - but there are still arrangements being sold, and an accountant should not be involved in doing that.”
While there is always going to be a risk, Murphy said, advisers should have at least an 85% to 90% belief that their advice is “absolutely watertight that it is going to survive challenge”.
“This clearly changes the balance of judgement,” he said. “It tilts the whole arrangement that suggests the balance of probabilities have to be heavily in favour of likely to be compliant.”