Tax Profession Research Articles

Opinion Statement of the CFE on the Consequences of Involvement in Missing Trader Fraud

This is an Opinion Statement prepared by the CFE Fiscal Committee. The CFE is the leading European association of the tax profession with 33 national tax advisory organisations representing over 180,000 tax advisers.

Ethical issues facing tax professionals

PurposeThe resolution of tax issues present significant ethical dilemmas for tax practitioners. The nature and extent of ethical concerns has important implications both for the tax profession and tax administration. The purpose of this paper is to investigate whether there are significant differences in the ethical perceptions of tax agents and Big 4 practitioners.Design/methodology/approachA mail questionnaire was used to elicit data as to the frequency and importance of a range of ethical issues in tax practice.FindingsBoth groups rated highly those issues which relate primarily to the conduct of professional responsibilities. Ensuring “reasonable enquiries” were taken, maintaining an appropriate level of “technical competence” and “continuing to act” for a client, when not appropriate, were of most concern to practitioners.Research limitations/implicationsThe paper focuses on the tax profession in Western Australia, so the outcomes may not be generalisable elsewhere in either Australia or the rest of the Asia‐Pacific region.Practical implicationsThere was a significant difference between the two groups with regard to “loophole seeking”. This has implications for client expectations of alternative roles: as “tax exploiter” for the Big 4, and as “tax enforcer/compliance” for the tax agent.Originality/valueThere have been few empirical studies reporting the range of ethical issues encountered in tax practice. To date the literature tends to treat the tax profession as a homogenous group, whereas this research demonstrates differences in ethical outlook between sole‐practitioners and large international public accounting firms.

Ethics and the Tax Profession: Restoring the Public Interest Focus

ABSTRACT: Tax practice is an integral component of the public accounting profession. Although accountancy as a profession embraces a strong public interest notion, there is an inevitable tension in tax practice between serving the client and maintaining the integrity of the tax system. Resolving this tension necessitates an ethics-infused judgment process. Ethical failures over the past decade have weakened the tax profession and called into question the extent to which practitioners in fact operate in a manner consistent with the public interest. In this paper, we explore the fundamental causes of the ethical problems that have plagued the tax profession and provide a roadmap for reform of the tax profession. Using Cressey’s (1953) fraud triangle as a framework, we first examine the normative ideal for the tax profession. We then examine the recent tax shelter abuses perpetrated by the major public accounting firms and find results consistent with our expectations under the fraud triangle analysis. In essence, ethical breakdowns resulted from the loss of a public interest emphasis, which in turn led to the explicit pursuit of commercial gain at the expense of the public interest. That the frauds were perpetrated within the context of a profession founded on a public interest notion is particularly concerning. In response to the problems observed, we identify key cultural reforms needed within the accounting academy, the accounting profession, and the tax system in order to restore trust and the public interest character of the tax profession to center stage and so guard against further adverse outcomes.

Ethics And Tax Education: A Change In Focus Is Needed

The corporate scandals of recent years have highlighted the failure of ethics, not only in corporate management, but also in the big accounting firms. For tax professionals, there is an inherent conflict of interest that makes studying ethics in the context of tax practice problematic. On the one hand, the tax professional is a client advocate with the responsibility of helping the client to legally minimize tax liability. On the other hand, tax professionals who are lawyers or CPAs and who practice before the IRS have both ethical and legal obligations mandated by their professions and the Department of the Treasury. For the tax educator, the problem is finding a way to reinforce the importance of ethical behavior while promoting an understanding of the inherent conflict that anyone in the tax profession faces. In this paper, we look at ethics in tax practice and consider the difficulties faced by faculty in providing an ethical grounding for undergraduate students in taxation. First we will discuss the professional standards already in place for CPAs— the AICPA Statements on Standards for Tax Services and the Treasury Department’s Circular 230. Next we will discuss the need for new guidelines, as demonstrated by the recent wave of lawsuits over tax shelters. Then we will look at ethics as covered in several popular tax textbooks. Finally, we will offer recommendations on improving the coverage of ethics and refining the focus of materials commonly available for educators.

Linking Ethics and Risk Management in Taxation: Evidence from an Exploratory Study in Ireland and the UK

Ethical dilemmas involving tax issues were identified by members of the American Institute of Certified Public Accountants as posing the most difficult ethical problem for them (Finn et al., Journal of Business Ethics 7(8), pp. 607–609, 1988). The KPMG tax shelter fraud case proves that the tax profession has not gone untainted in the age of numerous accounting and corporate scandals, such as the Enron debâcle (Sikka and Hampton, Accounting Forum 29(3), 325–343, 2005). High-profile scandals serve to highlight the problems caused by differences in ethical judgement among accountants and tax practitioners and the issue of ethics has been brought publicly to the forefront of the profession. Nevertheless, the nature and dimension of ethical issues in tax practice have been largely unexplored (Erard, Journal of Public Economics 52(2), 163–197, 1993; Marshall et al., Journal of Business Ethics 17(12), 1265–1279, 1998; Frecknall Hughes, Unpublished PhD Thesis, The University of Leeds, 2002). This research aims to contribute to the debate on ethics in tax practice by reporting interview data on tax practitioners’ perceptions of ethics in the jurisdictions of Ireland and the United Kingdom and exploring the link or equation of ethics with risk management.

A Long-Term Commitment to the Profession

Effective tax and superannuation administration depends on more than the efforts of the Australian Taxation Office. It also relies on a capable and well-regulated tax and accounting profession. So what are the challenges? This is what we, in the ATO, think.

A Partnership Based on Trust and Respect

I believe that the effective administration of the tax and superannuation systems are important for Australia's wellbeing and for our global competitiveness. However, effective administration relies on more than the capability of the Australian Tax Office - it also relies on the capabilities of other significant participants in the system, notably the tax profession. Right up front I would like to acknowledge that tax professionals play a crucial role in influencing levels of voluntary compliance and in facilitating efficient dealings with the Tax Office for their clients.

The ATO's Approach to Tax Administration: Working with the Tax Profession

Almost a year ago, I spoke with you at your Annual Conference in a speech called 'Value the past but focus on the future.' I am pleased to be with you, today, in the 'future' that I spoke about last year.

A New Relationship with the Tax Profession

In Australia, intermediaries such as tax agents have a symbiotic relationship with the tax administration. Tax professionals play an essential role in maintaining the integrity and efficiency of the tax system, providing a key compliance leverage point to influence taxpayer behaviour. Tax agents and the tax profession generally do an excellent job in helping people understand their rights and obligations under the tax law and making it easier for people to meet their tax responsibilities. The importance of this role is highlighted by the numbers of taxpayers who put their trust in the expertise of tax professionals, with tax agents lodging about 74 per cent of individual tax returns and over 95 per cent of businesses' tax returns.

Fostering public confidence in the tax profession: An examination of ethics and legal liability

Fostering public confidence in the tax profession: An examination of ethics and legal liability

A LONG INNINGS

The author has spent nearly 47 years in the Australian Taxation Office (ATO), rising to become Chief Tax Counsel and, for some periods, acting Second Commissioner. In this address (which was delivered on 29 November 2011), he reflects on his career, and examines issues that are relevant for the ATO and for the overall tax and superannuation systems. In the area of law interpretation, including dispute resolution, the author encourages greater engagement between ATO law experts and tax practitioners. In relation to litigation, there is the challenge for both the ATO and the tax profession of improving law clarification through the courts. The author urges a collaborative approach to the ongoing challenge of dealing with aggressive tax planning arrangements, and highlights the need for early communication by the ATO of its concerns and views about such arrangements. On policy advice and law design, it is important to have people effectively involved from both the public and private sectors, with shared objectives for improving the system.