Ethics and tax: Do the right thing

Most of us want to be ethical, but the potential for rationalization and groupthink dwells in all of us. For tax practitioners, learning how to spot — and think through — ethical issues is essential.

As CPAs, our education, training for certification and professional code of conduct all help build our ethical awareness and skills. But many ethical questions can arise that are unique to tax practice. For example:

  • Is my client giving complete and accurate information to the Canada Revenue Agency — or to me?
  • Does a technical loophole, or overly broad interpretation of a tax provision, justify taking a position that could adversely affect my client’s or my own reputation, if it were to become public?
  • Can a dubious filing position be justified on the basis that the audit risk is low?
  • Is it ethical to propose a complex tax plan to a client if I think it unlikely that they fully understand the implications of the proposal or can properly execute it?

In today’s environment, the ability to respond ethically to such questions is paramount. Paying the least amount of tax that is legally allowed is the desire of taxpayers. Delivering sound tax advice depends on having the full and complete facts, and it requires frank conversations with clients. Competitors are approaching your clients with tax-saving ideas and, whether or not those ideas are sound, some clients may look to you for the same — or take their business elsewhere.

f you work in industry, you may be pressured to contribute to earnings per share by finding a way to lower the effective tax rate. At the same time, governments, the media and public are getting more antagonistic toward those who push the envelope when planning their tax affairs — as well as those who advise them.

Knowing how to navigate these issues is imperative. Your reputation and the reputation of the profession as a whole are at stake.

Is ethical behaviour innate?

Some say ethics can’t be learned: You’re either an ethical person or you’re not. It’s true that the desire to act ethically, and the courage to do so, arises from one’s character. But some dimensions of ethical behaviour — how to identify that there is an ethical issue and how to reason through it — can indeed be taught.

That’s why CPA Canada’s In-Depth Tax Course now features training in tax ethics, both as part of a standalone module at the course’s outset and through ethical issues woven into many of the problems students tackle throughout the course.

Developed by Karen Wensley, adjunct lecturer in business ethics at the University of Waterloo and a retired tax partner with EY, this training is based on the premise that ethical reasoning and action is a skill — part of the toolkit of a reputable tax practitioner. New practitioners need to talk about and practice these skills, including how to raise issues with colleagues, employers or clients and how to escalate issues that remain unresolved. It is also imperative that they observe the ethical reasoning of senior practitioners they respect.

Of course, ethical issues can surface at any level of tax practice, from the most junior to most senior level, and ongoing training and reinforcement are important in professional tax practice.

CPA Canada’s new Ethics for the Tax Practitioner course adapts the In-Depth Tax Course lessons to suit the needs of tax practitioners at all stages in their careers. Delivered exclusively online with four modules, the course shows how to apply key concepts in ethics to issues you face every day in your tax practice. You’ll also hear from a wide range of tax practitioners about their experiences with accounting ethics.

To help you gain a better understanding of global developments on this topic, here are links to the Professional Conduct in Relation to Taxation guidelines of the Institute of Chartered Accountants in England and Wales (ICAEW) and other U.K. accounting bodies, along with a recent statement from the International Federation of Accountants.

Ethics training not only helps you to develop recognition and reasoning skills. By reinforcing the importance our profession puts on ethical behaviour, it can empower you to act on your conclusions and maintain your commitment as a CPA to act in the public interest at all times.

Leave me a comment

What ethical dilemmas do you face in your daily tax work, and how have you learned to resolve them? I encourage you to keep the conversation going by posting a comment below.

CPA Canada’s Tax Blog is designed to create an exchange of ideas on tax policy and practice issues and their impact on those who practise tax. Your comments can provide helpful input into the public interest advocacy positions developed by CPA Canada.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada