Client versus public interest: Where’s the line for tax advice?

The tax bills of several large corporations in the United Kingdom (U.K.) are being protested in the streets and debated in Parliament.

The tax bills of several large corporations in the United Kingdom (U.K.) are being protested in the streets and debated in Parliament. Companies like Starbucks, Amazon and Google are being lambasted for using legal tax planning to shift profits out of the country to slash their U.K. tax bills or eliminate them entirely.

At a time when governments across Europe are imposing severe austerity measures to improve their finances, their citizens are growing increasingly impatient with large corporations and high net worth individuals who use tax planning techniques to avoid paying what some would view as their “fair share.”

For tax advisers in the U.K. and here in Canada, this debate raises an important and difficult dilemma. A longstanding feature of Commonwealth tax law is the Duke of Westminster principle, laid down in a 1935 decision of the House of Lords. By this principle, taxpayers have the right to arrange their affairs to pay the least amount of tax possible. Thus, it could be argued that a large part of a tax adviser’s role is to help taxpayers minimize their taxes within the law.

Within the rules of professional conduct, there is an overriding principle that our members must protect the public interest. As part of these rules, members also have a fiduciary duty to their clients. The question some are asking is: when accountants are providing tax planning advice, do they also need to consider the broader public interest and thereby avoid tax planning that minimizes tax beyond a reasonable amount?

This question has no easy answer, but Canada’s accountants need to consider it carefully. As the U.K. debate shows, public attitudes toward tax planning are changing, and tax advisers are increasingly being called on to determine the right balance in protecting various interests.

Join in the conversation

Do you think an accountant advising a client has an overriding obligation to consider what is in the public interest? Are standards or guidelines needed to help resolve this potential conflict?

Post a comment below, or email Gabe Hayos directly.

Gabe

Conversations about Tax is designed to create an exchange of ideas on tax policy and practice developments and issues and their impact on Canadian accountants who practice tax.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada

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