10 Considerations When Offering Tax Planning Services
The International Ethics Standards Board for Accountants (IESBA) launched significant updates to its Code of Ethics standards which now addresses requirements for accountants when providing tax planning and related services.
It is a pertinent moment to reflect on the traditions that have shaped the South African tax practitioner ethical framework.
For decades, South African tax practitioners have not only adhered to but also pioneered rigorous ethical standards that go beyond compliance. Our dedication to sustainable and responsible business conduct is embedded in our operational DNA and is a principle we passionately impart to all our members. The recent initiatives by the International Ethics Standards Board resonate deeply with our own practices, reinforcing a shared vision towards enhanced integrity and transparency in our profession.
For example, the Tax Standards of the Chartered Institute for Business Accountants (CIBA) address the ethical requirements for tax practitioners in great detail. These standards, outlined ensure that all tax practitioners registered under CIBA adhere to a professional code of conduct and ethics, which includes due diligence work when providing tax advice. This framework not only upholds the integrity of the tax services profession but also safeguards the public by ensuring that tax advice is given competently and ethically.
The Legal Framework for Offering Tax Planning Services
According to Section 240 of the Tax Administration Act, tax planning services can only be offered by individuals who are registered tax practitioners. To qualify as a registered tax practitioner, an individual must be registered with a recognised controlling body such as CIBA. This requirement ensures that those offering tax planning services are adequately qualified and adhere to a professional code of conduct and ethics. The registration process involves meeting educational and practical experience requirements, as well as committing to ongoing professional development to stay current with tax laws and best practices. This framework is designed to uphold the integrity of the tax services profession and to protect the public by ensuring competent and professional tax advice.
The Importance of Ethical Tax Planning
Ethical tax planning is vital not just for following the law but also for keeping the public's trust in the financial system. Tax planning uses legal ways to reduce how much tax someone owes, helping them manage their finances effectively within the law's limits. On the other hand, tax evasion involves illegal actions like hiding income or inflating deductions to avoid paying taxes, which can damage the tax system and lead to serious legal consequences.
Accountants have an essential role in knowing the laws and advising clients to stay within legal boundaries. This is crucial for maintaining the professional integrity and the trust placed in them.
Considerations for Tax Practitioners
Accountants who are tax practitioners, providing tax planning and related services should observe the following:
Identify Ethical Threats: Accountants should look out for any ethical risks like conflicts of interest or situations where they might be tempted to compromise on ethics during tax planning. Understanding these risks is crucial to keeping their work ethical.
Ensure Credible Basis for Recommendations: It's important that tax planning advice is backed by law. Accountants must make sure that the strategies they recommend are both legal and ethical.
Consider Broader Consequences: When giving tax advice, accountants need to think about how it will affect public perception and the economy. This ensures that the strategies are good not just for the client but for society as well.
Maintain Detailed Documentation: Keeping detailed records of why decisions were made, any disagreements with clients, and discussions around tax planning is vital. This helps keep everything clear and transparent.
Manage Uncertainty in Tax Laws: Accountants should discuss any unclear tax laws with their clients or management. Sometimes, getting additional expert opinions is necessary to provide the best advice.
Uphold Integrity and Avoid Tax Evasion: Accountants must avoid illegal practices like tax evasion and always stick to providing advice that is within the law.
Continual Professional Development: Staying updated with the latest tax laws and ethical standards is essential. Accountants should regularly participate in educational events to keep their skills sharp.
Advise Based on Transparent Information: Accountants should base their advice on clear and accurate information. They should encourage their clients to be open and provide all the relevant details for effective tax planning.
Communicate Effectively: Clear communication is crucial. Accountants need to explain their tax planning strategies thoroughly and make sure clients understand the potential consequences of not following ethical advice.
Implement Safeguards: Putting measures in place to manage any ethical risks is important. Accountants should regularly check and adjust these measures to keep their practices safe and compliant.
Implications of the updated Code of Ethics
The revisions have several practical implications for Tax Practitioners as they need to:
Consider the legality and ethicality of the tax planning advice they provide.
Maintain detailed records on the rationale behind their tax planning strategies and any discussions or disagreements with clients.
Make ethical decisions, and consider the wider impacts of tax planning strategies, not just on their clients but also on the public perception and economic environment.
Keep up with professional developments and changes in tax laws.
In Conclusion
The updated IESBA standards represent a significant step forward in ethical accounting practice. By following these guidelines, professional accountants ensure that they offer advice that is not only effective but also ethically and legally sound. This commitment to ethical standards helps maintain the integrity of the tax system and promotes a fairer economic environment for all.
Use the CIBA template letter and keep your clients informed
Use CIBA’s template letter to send to your client informing them of the new requirements in the standards and the implications these may have for the services performed.
Enroll to CIBA’s Tax Advisor Subscription and keep up to date
By subscribing to the Tax Advisor Subscription you will gain you access to monthly webinars covering various topics; which will enable you to:
Be aware of the latest legislative changes and what it means for your business, practice, and your clients;
Prepare compliant taxation returns fast;
Issue reliable taxation calculations on financial statements;
Understand the laws and regulations that govern taxation; and
Perform tax advisory services.
