Professional ethics and the Tax Professional- Module 1. Jan Dijkman BA LLB LLM H Dip Tax Adv Dip Labour Law Certified Ethics Officer

Transcription

1 Professional ethics and the Tax Professional- Module 1 Jan Dijkman BA LLB LLM H Dip Tax Adv Dip Labour Law Certified Ethics Officer

2 Agenda What is ethics? Why is ethics important for Tax Professionals? Professions and ethics The Code of Professional Conduct in Relation to Taxation Fundamental principles Disciplinary trends Solving ethical dilemmas some guidelines Final thoughts

3 Agenda for Module 1 What is ethics? Why is ethics important for Tax Professionals? Professions and ethics The Code of Professional Conduct in Relation to Taxation Fundamental principles Disciplinary trends Solving ethical dilemmas some guidelines Final thoughts

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5 What is ethics? Oxford Dictionary: Set of principles of morals, rules of conduct Cambridge Dictionary: A system of accepted beliefs which control behaviour; the study of what is morally right and what is not Wikipedia: Ethics is a branch of philosophy that involves concepts of right and wrong conduct. Ethics seeks to resolve questions of dealing with human morality concepts such as good and evil, right and wrong, virtue and vice, justice and crime

6 What is ethics? Ethics No distinction between ethics and morality Ethics concerns itself with what is good or right in human interaction Three central concepts: self good other Ethical behaviour is when one does not merely consider what is good for oneself, but also considers what is good for others

7 What is ethics? Ethics deals with well-based standards of how people ought to act and is prescriptive Values and ethics Law and ethics Grey areas Ethical relativism Situation ethics

8 Conundrum Understanding ethics is easy, being ethical isn t

9 Why the emphasis on ethics? King III Code of Corporate Governance First governance principle ethical leadership and corporate citizenship Provide effective leadership based on an ethical foundation Ethical leaders should Do business ethically Set the values to which the company will adhere Ensure that conduct is aligned to values and is adhered to in all aspects of the business Social and ethics committee Companies Act

10 The ethical dimensions of business When morality comes up against profit, it is seldom that profit loses. Shirley Chisholm

11 Why is ethics important for Tax Professionals? Integrity is the basis of a sound tax system Integrity means that a person acts on principle The Golden Rule of ethics Why is ethics important for Tax Professionals?

12 What is a profession? A profession is distinguished by certain characteristics: Mastery of a particular intellectual skill, acquired by training and education; Acceptance of duties to society as a whole in addition to duties to the client or employer; An outlook which is essentially objective; Rendering personal services that adhere to a high standard of conduct and performance

13 Professional ethics The norms and guidelines for moral and ethical behaviour for professionals. Guidelines for professional ethics are usually codified in codes of ethics or codes of professional conduct

14 What is the purpose of a Code? Distinguishing characteristic of a profession is the adherence to ethical standards embodied in a professional Code Code establishes ethical requirements for members of the profession Code facilitates accountability, responsibility and trust

15 Why do we need an ethics code? Because of diverse make-up of profession, need exists for common understanding of ethics Hence the Code of Professional Conduct Characteristic of a profession that there is a commitment to ethical behaviour

16 Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws. PLATO

17 The Code of Professional Conduct in Relation to Taxation

18 What is the purpose of the SAIT Code? Provides guidance on proper conduct for Tax Professionals Adherence to the Code assists in protecting the public interest Assists Tax Professionals to resist pressure to violate the Code Provides a mechanism by which action can be taken against unethical conduct by Tax Professionals Helps to achieve the objectives of the Tax Profession

19 Structure of the SAIT Code Combination of principles-based / rules-based Code. What s the difference?

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21 Fundamental principles Integrity Objectivity Professional competence and due care Confidentiality Professional behaviour

22 Threats Self-interest threat Self-review threat Advocacy threat Familiarity threat Intimidation threat

23 Self - interest threats The threat that a financial or other interest will inappropriately influence the Tax Professional s judgment or behaviour Examples: Undue dependence on total fees from a client Concern about losing a client

24 Self - review threats The threat that a Tax Professional will not appropriately evaluate the results of a previous judgment made or service performed by the Tax Professional, or by another individual within the Tax Professional s firm, on which the Tax Professional will rely when forming a judgment as part of providing a current service Examples: Discovery of significant error during re-evaluation of work Having prepared the original data

25 Advocacy threats The threat that a Tax Professional will promote a client s position to the point that the Tax Professional s objectivity is compromised Examples: Acting as advocate on behalf of assurance client in tax litigation or tax disputes

26 Familiarity threats The threat that due to a long or close relationship with a client, a Tax Professional will be too sympathetic to their interests or too accepting of their work Examples: Long association of senior staff with client

27 Intimidation threats The threat that a Tax Professional will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the Tax Professional Examples: Threatened with dismissal or replacement Threatened with litigation or being reported to professional body

28 Safeguards Safeguards are actions or other measures that may eliminate threats or reduce them to an acceptable level. They fall into two broad categories: (a) Safeguards created by the profession, legislation or regulation; and (b) Safeguards in the work environment.

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30 Safeguards Safeguards include: Educational, training and experience requirements Continuing professional development requirements Compliance with tax standards Professional monitoring and disciplinary procedures Involving another Tax Professional to review the work undertaken Consulting an independent third party Work environment safeguards include: Leadership Published policies and procedures

31 Fundamental principles Integrity Objectivity Professional competence and due care Confidentiality Professional behaviour

32 General compliance with the fundamental principles (1) Most important duty is to ensure that actions comply with the law Secondary duty to carry out the agreed tasks with the requisite care and skill Need to advise client of obligations and the consequences of non-compliance Must act in best interests of client (within the law!) Concept of one client at a time Must act within the law

33 General compliance with the fundamental principles (2) Must not knowingly be associated with reports, returns, communications or other information where information: Contains a materially false or misleading statement Contains statements or information furnished recklessly Omits or obscures information required to be included where such omission or obscurity would be misleading NB ethical action required in above situation When a registered practitioner becomes aware that the above has occurred he must cease (my emphasis) to represent the taxpayer concerned if the taxpayer does not remedy the situation

34 Integrity Integrity is doing the right thing, even if nobody is watching. Jim Stovall

35 Integrity The measure of a man s real character is what he would do if he knew he would never be found out. Thomas Babington Macaulay

36 Integrity Principle of integrity imposes an obligation to be straightforward and honest in professional and business relationships Integrity also implies fair dealing and truthfulness, a sound mental attitude It is consistently practising moral behaviour, honesty

37 Objectivity Principle of objectivity imposes an obligation not to compromise professional or business judgment because of bias, conflict of interest or the undue influence of others Objectivity is having an impartial mental attitude, fairness, taking a balanced approach

38 Professional competence and due care Principle imposes obligation to: Maintain professional knowledge and skill at the level to ensure competent professional service Act diligently in accordance with applicable technical and professional standards

39 South African Taxation Standards Preface to SA Tax Standards SATS 1000: Knowledge of the client SATS 2000: Filing tax returns SATS 3000: Procedural aspects of preparing tax returns SATS 4000: Use of estimates SATS 5000: Departure from a position previously determined in an administrative proceeding or court decision SATS 6000: Knowledge of error: Tax return preparation SATS 7000: Knowledge of error: Administrative proceedings SATS 8000: Form and content of advice to taxpayers

40 South African Taxation Standards SATS 1000: Knowledge of the client Tax professional must: Confirm who is his client Confirm that the client is who he says he is Consider obtaining references Identify any potential conflicts of interest Satisfy initial obligations under AML regulations Tax professional must become familiar with circumstances of client: Understand scope of services Understand client s business and attitude to risk Confirm terms of appointment in letter of engagement

41 South African Taxation Standards SATS 2000: Filing tax returns When involved with filing tax returns, the tax professional: Should not recommend an unrealistic position Should not prepare a return that is contrary to the Standards, the Code and tax law Can take contrary view provided that appropriate disclosure is made and client advised of risks Taxpayer has the final responsibility for positions taken on the return In adopting a filing position, the tax professional must perform adequate and appropriate research to support the position

42 South African Taxation Standards SATS 3000: Procedural aspects of preparing tax returns Tax professional may rely in good faith on information provided by the taxpayer, but should make reasonable enquiries in certain circumstances Confirmation from the client should be obtained if certain conditions need to be met before a certain outcome is achieved Tax professional must consider all information known to him, even from other sources, but keeping confidentiality in mind As taxpayer has ultimate responsibility for the contents of a return, tax professional must encourage full disclosure, and make taxpayer aware of consequences of non-disclosure

43 South African Taxation Standards SATS 4000: Use of estimates Tax professional may use taxpayer s estimates, if it is not practical to obtain exact data, and if the estimates are reasonable Estimates should not be presented in a way that implies greater accuracy Disclosure of estimates should be consistent with SARS procedures Accounting judgements in accordance with the appropriate standards, are not deemed to be estimates Estimates should not be presented in a way that misleads

44 South African Taxation Standards SATS 5000: Departure from a position previously determined in an administrative proceeding or court decision Tax professional may recommend a different tax position in a later year, notwithstanding a tax position determined in an administrative proceeding or court decision, unless bound to that position by a written agreement or dispensation Same tax treatment is usually recommended in subsequent years, but deviation is possible in certain instances: Supporting documentation now available Position conceded for settlement purposes New developments favourable to position may now exist

45 South African Taxation Standards SATS 6000: Knowledge of error: Tax return preparation Tax professional should inform taxpayer promptly upon becoming aware of an error in a previous return, or the taxpayer s failure to submit a return Tax professional should recommend corrective measures to be taken No obligation to inform SARS, and may not do so without client s permission If taxpayer has not taken appropriate action to remedy shortcomings, tax professional should withdraw from preparing current return and consider continued relationship with client

46 South African Taxation Standards SATS 7000: Knowledge of error: Administrative proceedings If a tax professional is representing a taxpayer in an administrative proceeding, and becomes aware of an error that is the subject of such proceedings, he should promptly inform the taxpayer Tax professional should recommend corrective measures to be taken No obligation to inform SARS, and may not do so without client s permission Tax professional should request permission to disclose error to SARS. If not forthcoming, should withdraw and consider continued relationship with client

47 South African Taxation Standards SATS 8000: Form and content of advice to taxpayers Before providing advice, tax professional should identify: Who is to rely on advice Purpose of advice Scope of advice Engagement letter covering the assignment should be provided Advice must follow SATS 2000 Filing Tax Returns guidance If specialist advice is obtained and relayed to taxpayer as part of advice, tax professional assumes responsibility for the advice Tax professional to exercise professional judgement in deciding on form of advice written advice recommended

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49 Professional competence and due care Attain and maintain knowledge and skills Take reasonable care in ascertaining and presenting client s tax status Ensure that taxation laws are applied correctly and lawfully Not knowingly obstruct the proper administration of tax laws Ensure that client advised of rights and obligations under the tax laws Exercise due care and diligence in their interaction with SARS on behalf of clients

50 Confidentiality Principle imposes obligation to refrain from: Disclosing confidential information outside the firm or employing organisation Using confidential information acquired as a result of professional or business relationships to personal advantage or the advantage of third parties

51 Confidentiality Exceptions to confidentiality rule, where disclosure Is permitted by law or authorised by client Is required by law e.g. Subpoena, or in terms of legislation e.g. POCA, FICA, POCDATARA, PRECCA Is in terms of professional rights or duties e.g. disciplinary enquiry

52 Confidentiality and legal professional privilege What is legal professional privilege? Requirements for legal professional privilege to be claimed: Communications made to a legal advisor acting in a professional capacity Information must have been supplied in confidence Information must have been supplied for purpose of pending litigation or obtaining professional advice Client must claim the privilege Responding to requests for information by SARS and third parties If in doubt about disclosure, obtain client s consent (preferably in writing)

53 Professional behaviour Principle imposes an obligation to comply with relevant laws and regulations and avoid any action that he/she knows or should know may bring discredit to the profession

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55 Professional behaviour Act in a way that is consistent with the reputation of the profession Refrain from misconduct Act with courtesy and consideration to all third parties

56 Professional behaviour Relationship with client (1) Relationship should be governed by an appropriate letter of engagement Set out in sufficient detail the who, what, by when, by whom, and how much Ethical assistance Tax professionals are urged to include the following statement: We will observe the professional rules and guidelines of our professional Institute and accept instructions to act for you on the basis that we will act in accordance with those guidelines Comply with tax standard SATS 1000 engagement letter must be obtained

57 Professional behaviour Relationship with client (2) Every contractual relationship should be covered in separate engagement letters Basis of agreement is that client is prepared to disclose all necessary information to Tax Professional Failure to do so should lead to Tax Professional considering their continued association with the client If relationship is terminated, Tax Professional must update client wrt their tax position in writing Keep detailed notes, get written confirmation of oral advice given Obtain specialist knowledge when necessary Remember Confidentiality fundamental principle

58 Questions? 58

59 The Code of Professional Conduct in Relation to Taxation... To be continued in Module 2