Freedom of choice: Taxpayers’ right to confidential tax advice

Professional accountants who practice tax often provide tax advisory services that are indistinguishable from lawyers' tax services. But under common law in Canada, only communications with lawyers are protected as privileged in specified circumstances.

Professional accountants who practice tax often provide tax advisory services that are indistinguishable from lawyers' tax services. But under common law in Canada (Quebec has different consequences due to its provincial legislation), only communications with lawyers are protected as privileged in specified circumstances. Accordingly, taxpayers who engage qualified tax practitioners who are not lawyers are denied access to similar rights of confidentiality. In Québec, professional secrecy of CPA is guaranteed by the Quebec Code of Ethics of Chartered Professional Accountants [section 48] and by the Quebec Charter of Human Rights and Freedoms.

The common-law concept of privilege is vital in a world of complex laws, such as tax law. Privilege permits individuals to have open and frank discussions with their advisers so they can understand their rights, their obligations to comply and the consequences of non-compliance.

Over the hundreds of years since privilege was developed in common law, the world has evolved. Tax law today requires not only expertise in the interpretation of legislation but also an understanding of finance and accounting concepts. Professional accountants have become key to the sustainability of Canada’s self-assessment tax system. Indeed, it is well recognized that professional accountants supply the majority of tax services provided within in the Canadian tax system.

But currently, taxpayers who can afford tax lawyers enjoy a basic right that is denied to taxpayers who cannot afford or do not have ready access to both a tax lawyer and a professional accountant. Given Canada’s large size and small, dispersed population, often the only accessible qualified tax adviser is a local professional accountant. As a result – and some think contrary to the Canada Revenue Agency’s (CRA) Taxpayer Bill of Rights, its fairness pledge and its commitment to small businesses – taxpayers are deprived of their right to seek confidential tax advice from the qualified adviser of their choice.

Without the right of confidentiality, taxpayers may be unwilling to provide their tax adviser with all of the relevant facts and so the quality of the tax advice suffers. With the right of confidentiality for all taxpayers and the full and frank discussions it fosters, professional accountants can provide complete advice and better compliance would result.

Sound public policy should always facilitate unfettered access to advice from qualified advisors so that citizens may understand their rights and obligations and conduct themselves responsibly. CPA Canada believes that extending the right of confidentiality to all taxpayers who seek tax advice from professional accountants serves the public interest by:

  • enhancing taxpayers’ access to tax advice, based on full and frank discussions
  • ensuring equal rights for all taxpayers
  • enhancing taxpayers’ trust and confidence in the fairness of the tax system
  • strengthening Canada’s voluntary self-assessment system
  • promoting better taxpayer compliance

Internationally, Canadian public policy falls well short of the policies governing taxpayer confidentiality in our major trading partners. Other common-law jurisdictions, including the United Kingdom, Australia, New Zealand and the United States, have recognized there are sound reasons for extending the right of confidentiality to all taxpayers who seek advice from qualified tax advisors, including professional accountants, either through legislation or more comprehensive administrative procedures.

Should Canada extend the right of confidentiality to taxpayers who receive advice from qualified tax practitioners, including professional accountants, it will be important for CPA Canada to monitor and keep current our professional standards, as well as oversight mechanisms, code of conduct and disciplinary process.

We recognize that any legislation to broaden taxpayers’ confidentiality rights would need to address CRA’s concerns that any such right might impede its access to taxpayer information. Other jurisdictions have developed mechanisms to balance the taxpayer’s right to confidentiality with the tax authority’s right to obtain the data it needs for assessment, audit and enforcement. In Canada, we believe these issues need to be resolved in the public interest through dialogue, negotiation and a set of clear, mutually agreed objectives.

Join in the conversation

Do you agree that all Canadian taxpayers should have the right of confidentiality for advice received from qualified tax advisers including professional accountants? Do you have suggestions about how this can be achieved in a way that balances taxpayers’ rights with the interests of CRA?

Post a comment below, or email Gabe Hayos.

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. Comments received can provide helpful input to the public interest advocacy positions developed by the Chartered Professional Accountants of Canada.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada

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