Making friends of foes to improve tax compliance
28 June 2016
Posted by: Author: Amanda Visser
Author: Amanda Visser (BDlive)
As governments try to improve tax compliance, they face the tricky task of shifting an often adversarial relationship with tax advisers towards a more co-operative one.
In SA the relationship between tax advisers and the South African Revenue Service (SARS) has never been rosy. The government has been openly critical of the role advisers play in aggressive tax evasion and avoidance.
The European umbrella body for the tax profession in June published an opinion statement on the tension between governments’ expectations regarding compliance and advisers’ responsibilities towards their clients.
The Conféderation Fiscale Européenne (CFE) says in its statement taxpayers have the right to be advised and represented by qualified tax professionals of their choice — but advisers and their clients must fully respect the law.
"This includes the written law, case law and unwritten recognised legal principles, like in some countries, the concept of abuse of rights."
In a PwC survey last year, 60% of directors said their boards had not discussed public perceptions about their companies’ effective tax rate or use of tax havens.
Globally, measures taken to curb tax evasion and avoidance include the finalisation of the Organisation for Economic Co-operation and Development’s (OECD’s) 15-point action plan against base erosion and profit shifting (Beps).
The OECD has for many years promoted the concept of a co-operative compliance framework within which revenue authorities and tax professionals should operate.
In a 2013 report — the year in which the tax profession was regulated in SA, after being self-regulated before — the OECD called for an "enhanced relationship" between advisers and revenue authorities.
The CFE and two other professional bodies last year proposed a Model Taxpayer Charter listing the rights and responsibilities of taxpayers towards tax administrations.
SARS describes its relationship with tax advisers as cordial. "This is aimed at getting us to work together to build and sustain a culture of tax morality," says a spokesman.
SARS says it does not have any co-operative compliance agreements in place, but is open to considering such agreements.
"The primary focus of co-operative compliance is between the tax administration and business. Tax intermediaries are indirectly affected."
Johan van der Walt, committee member of the South African Institute of Tax Professionals, says there are revenue authorities that see tax practitioners as positive players in the tax environment, despite being on the "other side of the fence".
"However, there are revenue authorities that see tax practitioners as the facilitators of rogue deeds such as tax avoidance and tax evasion. They really consider them as the enemy," Van der Walt says.
"It is unfortunate as it leads to an ‘us and them’ approach and the relationship becomes destructive."
Tax practitioners are in close contact with their clients and have a major influence on their approach towards tax compliance. If practitioners are negative about the conduct of a revenue authority, they have the ability to influence their clients’ behaviour and tax mentality.
"A hostile and destructive relationship towards practitioners serves no one. It creates resentment on the side of practitioners and their clients. It can potentially distort the relationship between the revenue authority and the tax-paying community," Van der Walt says.
SAIT CEO Keith Engel says there has been a "one-size-fits-all" tendency from both government tax officials and practitioners around the world.
Weak revenue authorities simply make rules based on worst-case scenarios and the heavily compliant inadvertently bear the bulk of the burden.
"On the other hand, many taxpayers similarly blame helpful public servants for the failings of an obstructionist few. The politics of the day have unfortunately strained tax relationships even further," says Engel.
Chris van Dyk, head of legal at SAIT, says the institute has identified the need for a specific taxation-orientated ethics programme as opposed to the more general ethical approach. The intention is to include the programme in next year’s continued professional development programme.
The institute has not acted against any member for assisting in tax avoidance or evasion. It has not received any complaints from SARS in this regard, says Van Dyk.
SARS confirmed that it had not taken action against tax advisers in this regard.
This article first appeared on bdlive.co.za.