ICAS strategy on tax avoidance and evasion
While constantly reviewing its strategy towards tax avoidance and evasion, ICAS welcomes input from its members, explains Charlotte Barbour.
In May 2015 ICAS published a Statement on Tax Avoidance and Tax Evasion, which called for a clearer long term strategy for the UK tax system.
The statement consisted of an action plan focusing on effective solutions to build a sustainable tax regime that would be fit for the UK in the 21st Century. It called for informed debate on tax burdens, tax avoidance and tax evasion, and issued challenges in a range of areas including effective legislation, high standards of behaviour and greater clarity.
The ICAS Technical Policy Board's six-point action plan was built on a series of calls made to the political parties in the ICAS May 2015 General Election manifesto Counting on Change.
Key action points
Six key components must be addressed. ICAS has called not only on its members – and for this purpose I mean CAs and ICAS Tax Professionals (ITPs) – but also on politicians, commentators and the public to align future efforts to solving these.
The tax law must work properly
The UK needs simpler, better tax legislation because it is the law passed by Parliament which the Courts must apply and which determines the tax revenues that HMRC can collect.
High standards of behaviour are required all round
These are required from CAs, tax advisers, tax administrations, businesses and individuals.
Better information is needed
The public at large deserves to be better informed on tax, with clear explanations being given of business tax complexities and current tax practices.
Tax policy needs clarity
Governments need to be clear on the underlying principles which govern their tax policy approach. They also need to be clear on which taxpayers benefit from their tax policies and why.
Businesses need to be transparent
Businesses should consider providing accessible and coherent narrative explanations of their overall tax contributions.
Criminal tax evasion needs greater focus
Public debate on tax avoidance tends to vilify those operating in a lawful fashion, whilst ignoring the systematic criminality of those in the black economy.
ICAS, through its technical committees and supporting tax personnel, is constantly exploring and reviewing its action plans with specific reference to evolving attitudes on avoidance and evasion. It does so against the background of the constraints within which ICAS and its members must work.
The Royal Charter
Under its Royal Charter, the objects of ICAS are “to maintain and promote the status of the profession of Accountant, to promote and safeguard the rights and interests of its members in all matters affecting the profession, to uphold and enforce among its members a high standard of efficiency and professional conduct in the interests of the profession and the public generally and to give concentrated expression to their opinions upon all questions and laws affecting the business of the profession.”
The Code of Ethics
ICAS members are bound by a Code of Ethics, based on IFAC’s international code of ethics for professional accountants and last updated on 1 January 2014.
The Code of Ethics helps professional accountants to meet their Charter obligations by providing them with ethical guidance, and it can also assist clients and other third parties in understanding ethical considerations in various circumstances and situations. Failure to follow the Code may lead to a professional accountant becoming liable to disciplinary action.
Amongst other matters, the Code addresses a broad range of tax services which may include tax return preparation, tax calculations for accounts, tax planning and other tax advisory services, and assistance in the resolution of tax disputes.
Further ethical guidance and support for ICAS members comes from The Power of One – an initiative calling on every member to place ethical leadership at the heart of their professional responsibilities, so as to shape the culture and values of their organisations, to help re-establish ethics at the core of business practices and to rebuild public trust in business.
Professional Conduct in Relation to Taxation
ICAS members are also expected to comply with the guidelines on Professional Conduct in Relation to Tax agreed jointly among ICAS and other professional bodies. These were last updated on 1 May 2015.
These guidelines address the differences between tax planning, which is legal, and tax evasion which is not. Tax ‘avoidance’ falls somewhere between these two and is an evolving area that can depend on the tax legislation, the intention of Parliament, interpretations in case law and the varying perceptions of different stakeholders. Despite attempts by courts over the years to elucidate tax ‘avoidance’ and efforts by HMRC and other government bodies to differentiate it from acceptable tax planning or mitigation, there is no widely accepted definition. This is discussed by David Small in ‘Tax planning: What is legally acceptable?’
When giving tax advice, an ICAS member is expected to consider carefully whether the planning in question is robust or whether it could be challenged successfully by HMRC, as well as the reputational risks for the member and the client and any potential negative impact on the public perception of the integrity of the tax profession more generally.
There are also on-going meetings between HMRC and the professional bodies to discuss ‘the Challenge’ issued in March 2015, in which the government asked “…the regulatory bodies who police professional standards to take on a greater lead and responsibility in setting and enforcing clear professional standards around the facilitation and promotion of avoidance to protect the reputation of the tax and accountancy profession and to act for the greater public good.”
Other guiding principles
The qualification and quality control measures to which ICAS members are subject provide important safeguards for HMRC, clients and the public at large.
ICAS members support tax compliance and compliant taxpayer behaviour. They make complex tax regimes workable for businesses and individuals, and help reduce risks of unexpected tax costs for all taxpayers.
ICAS also supports informed initiatives to increase the public understanding of tax.
Contribute to the discussions
One of the key themes of the ICAS Tax Conference taking place on 24 May 2016 is to discuss tax avoidance, public attitudes towards this, and where the profession stands. Members are encouraged to participate in this debate either at the conference or by contributing their views to firstname.lastname@example.org.