The Role of Professional Accountants in the Proper Functioning of Taxation Systems

Russell Guthrie | September 30, 2014 | 3

Available Languages: English | Russian

There has been much recent debate in many sectors of the economy and among politicians about the role of taxation in society, the extent to which tax planning is appropriate, and taxpayer behavior.

Throughout the world, accountants—with their technical expertise and professional and ethical training—play a key role in assisting client and employer taxpayers regarding tax obligations. A 2007 report by the Forum on Tax Administration (consisting of Tax Commissioners from 45 countries) acknowledged the crucial role that intermediaries such as accountants play in ensuring tax systems function properly.

So what role should accountants play?

At one extreme, it is clear that tax evasion—which is illegal—should be condemned by all parties and no professional accountant should ever be associated with it. At the other, leveraging tax incentives in the way they are intended by governments is certainly appropriate. Between the two extremes lies the complex question of “tax avoidance”, which is by definition legal. This poses a difficult dilemma for taxpayers and, thus, for the accountancy profession.

The nature and extent of the tax debate is very different in different parts of the world; even in countries where the debate is the most intense (some parts of Western Europe and the US, for example) there are varying views.

For the profession, it is ultimately most important to recognize that professional accountants:

  • Are, and should be, a force for consistency and stability in their economies, and have an important role to play in the functioning of sound and effective taxation systems. They help employers and clients understand their fiscal and regulatory obligations in relation to taxation and advise them on how to comply;
  • Ensure that their employers and clients understand the options available to them and assist them to be as tax-competitive as possible (thus creating economic wealth and employment), but should also ensure that they understand the consequences of each option (including potential reputational consequences);
  • Are obliged to comply with strict ethical principles (e.g., the international Code of Ethics or the codes of national professional and regulatory organizations), and are guided by the fundamental principles of integrity and professional behavior; and
  • Play an important role in combating tax evasion. For example, accountants in public practice help clients comply with their legal obligations. If a client is unwilling, an accountant considers options, such as resigning from the account; in some circumstances, accountants may have a reporting obligation to revenue or regulatory authorities.

Clearly, accountants play an important role—in effective tax systems, employer and client education, business advisory, ethics, and more. And taxpayers, of course, must make the ultimate decisions about their activities and compliance. But it is paramount to recognize that governments are responsible for promulgating and implementing taxation laws that are clear, fair, and appropriate for our global economy. They must carefully consider the consequences of their decisions about taxation laws (including, potentially, unintended consequences) and amend them if the results are not as intended.

As this debate continues—as there is little doubt it will—it is important to recognize that governments, taxpayers, and professional accountants each have important responsibilities and crucial roles to play in efficiently functioning taxation systems.

Russell Guthrie

Russell Guthrie

Executive Director, External Affairs, and Chief Financial Officer

Russell Guthrie was appointed to his role in February 2014. He is responsible for external and member relations, finance, and the organization's strategic direction. He also oversees public policy, regulation, and communications.Mr. Guthrie previously held various leadership roles within IFAC having joined IFAC as director in March 2001.Prior to joining IFAC, he worked for 12 years in the assurance practice of KPMG—initially in Dallas, Texas, followed by two years in Rotterdam, the Netherlands. He also has extensive experience in the development and maintenance of firm quality control programs, having served for three years in Amsterdam, the Netherlands, as KPMG's Director of Global Quality Assurance.Mr. Guthrie graduated with honors from the University of Texas at Arlington in 1988, receiving a bachelor's degree in business administration. He is a licensed CPA in the states of Texas and New York and is a member of the American Institute of CPAs. See more by Russell Guthrie

Join the Conversation (3)

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Twaha Kaawaase November 12, 2014

Yes Russell is spot on, I find it appropriate that we accountants should be playing a central role in advising our clients on tax-efficient options and see no harm in it provided it follows the law. I come from a part of the World where a tax authority allows any 'Tom, Dick and Hurry' to sign-off and file tax returns for clients ! The result has been an apparent dilution of a need to have such a return certified by a CPA as clients seem to want to avoid an imagined high cost of a CPA !!

Apollo Raymond Kamwebaze October 8, 2014

For a State that functions effectively and efficiently, I would feel very guilty if I found myself advising a client on how to pay to such a State as less tax as possible. how can I enjoy a conducive operating environment without being concerned with how its made possible? without contributing a token or advising one to do the same? Its only States that realize that they are servants to the citizenry that are able to mobilize Humongous resources in so doing, countering the effects of tax evasion and tax avoidance. Take for instance if the State minimized its recurrent expenditures while increasing its development expenditure, infrastructure created like improved transport, communication would attract more investments thereby increasing employment levels. As you will realize, States where leaders treat their citizens as their servants are the ones where tax evasion and avoidance is most rampant.

Mats Olsson October 1, 2014

I do agree with your very clarifying article Russell! If it is free of charge to park your car on one side of the road but on the other side, it costs 5 USD/hour, then it is natural to advice everyone to park where it is free, given everything else the same.Tax is one of many costs in a business so of course we should act as professional advisers in this area as well. But, one main problem we have as practitioners is that governments sometimes are using taxes in a way that makes it hard for IFAC as an organization when promoting strong international economies and financial markets. We as practitioners, I think we generally take our responsability. Our clients, well I can only speak for my own, they do not want to pay more tax than necessary but they also realize the value and public interest in paying tax. But how's about the governments -can we even put a responsability on them to "care" about other nations when adopting new tax rules, creating new tax heavens etc? Because I think the big problem lies there. //Mats Olsson

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