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Ethics and tax is not something you intuitively put together.
Ethics and Tax
But when you think about it you deal with it every day. Ethics is woven through our tax and legal system. To act ethically is a fundamental principle of our society although some might question how much. And when you come across an adventurous client or a tricky set up, you will unconsciously make ethical decisions.
UNSW runs a ‘Tax Planning and Anti-Avoidance’ course as part of its Master of Taxation program (MTax). And this course starts with looking at ethics and tax.
So we wanted to know more and asked Michael Walpole, the Head of School of Taxation and Business Law at UNSW, for details. Here are 8 points we noted:
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# 1 Morals and Ethics
There are many angles to approach the question of ethics and tax from. The UNSW course starts with morals. What are morals? And then leading on from that: What are ethics?
# 2 Ethics in Tax
Leading on to ethics that apply in tax, you can look at the Accounting Professional Ethical Standards Board (APESB) code as well as the code in the Tax Agents Services Act (TASA 2009).
# 3 Anti-Avoidance
You can’t talk about ethics and tax for long without talking about anti-avoidance. So this is what the course spends most of its time on.
What does tax-avoidance look like? How does it work? And how do the anti-avoidance provisions wrap around that? Tax avoidance consists of many shades of grey. And so this is where ethics come into play.
# 4 Tax Evasion
Tax evasion doesn’t get the lime light because evasion is a clear cut case of breaking the law. There is no grey – or at least very little.
# 5 Tax Agents Between a Rock and a Hard Place
If you play it too safe and don’t drive close to the edge reducing your client’s tax bill, your clients may sue you and win. And if you take risks and the advice goes wrong, they may sue you as well and win. And so tax agents are caught between a rock and a hard place.
# 6 John Symond in the Aussie Home Loan Case
And this is what happened in John Symond’s case. John Symond, the founder of Aussie Home Loans, accused his tax advisers of giving wrong advice which resulted in a $11 million tax loss and double taxation.
The advice concerned a restructure of Aussie Home Loans and got Symond to take $57 million in redeemable preference shares. Advice at the edge that went wrong. And so Symond is suing for $13m damages plus cost.
# 7 Not All Tax Avoidance is Cheating
A lot of people think all tax avoidance is bad and cheating. But is that the case? Or is it only when tax avoidance leads to tax evasion?
# 8 Decisions
As tax practitioners, each of us has to settle in our mind what advice we give, where we draw the line, where we won’t go and rather break that relationship. You can’t make a moral decision for your clients. Your obligation is to serve them in their best interest but legally.
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Disclaimer: Tax Talks does not provide financial or tax advice. This applies to these show notes as well as the actual podcast interview. All information on Tax Talks is provided for entertainment purposes only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 04 May 2020
Tax Talks spoke to Michael Walpole - Professor and Head of School at UNSW Business School - for more details.
