“If It Is Legal, Is It Acceptable?” – an ethics quality discussion paper for all advisers

Against the backdrop of recent actions by governments and lawmakers, such as the G7 agreement on minimal global corporation tax and anti-tax avoidance initiatives of the EU, CFE has issued a discussion paper founded on its commitment to high professional standards in tax advice seeking to promote ethical professional judgment across all tax advisers in Europe. While tax advisers play a valuable role in the proper functioning of tax systems, this role can be undermined by the promotion of abusive tax arrangements within legal parameters.

“If it is legal, is it acceptable?” is the central ethical question which inspired this paper. It is distinct from criminal tax evasion – breaking the law – which CFE unequivocally condemns. The question comes down to whether there is manipulation and artificiality in tax planning. CFE has issued this paper to stimulate discussion on how to tackle this problem among all who have an interest in how our tax systems function in Europe, not just tax specialists. We are actively seeking stakeholder feedback.

Setting an Ethics Quality Bar 

This paper is focused on the future, noting that tax systems will play a key role in repairing the strained public finance conditions after the COVID-19 pandemic, as well as the growing transformational impact of technology on tax services and tax administration overall. The principal objective of the paper is to seek feedback on a proposed “ethics quality bar” based on five questions that all tax advisers should reflect on when undertaking their advisory role in the overall tax system.

CFE seeks views on whether the questions can help to steer all advisers in the direction of an appropriate balance between the rights and obligations of taxpayers, avoiding abusive planning. To that end, a series of stakeholder events will be announced in due course.

Executive summary

This discussion paper is founded on CFE’s commitment to high professional standards in tax advice and seeks to promote ethical professional judgment across all tax advisers in Europe. While tax advisers play a valuable role in the proper functioning of tax systems, this role can be undermined by the promotion of abusive tax arrangements within legal parameters. CFE has issued this paper to stimulate discussion on how to tackle this problem among all who have an interest in how our tax systems function in Europe, not just tax specialists. We are actively seeking stakeholder feedback.

“If it is legal, is it acceptable?” is the central ethical question which inspired this paper. It is distinct from criminal tax evasion – breaking the law – which CFE unequivocally condemns. The question comes down to whether there is manipulation and artificiality in tax planning, for example, where planning arrangements are designed without any genuine underlying economic purpose other than achieving the tax saving. Some commentators refer to this problem as “aggressive tax avoidance”, but we are mindful of the endless debates over terminology, not least due to the problems of translation. Therefore, we refer generically to abusive and aggressive tax-avoidance arrangements and we focus on what could be done to address the problem as a whole in relation to all tax advisers in Europe.

This paper is focused on the future, noting that tax systems will play a key role in repairing the strained public finance conditions after the COVID-19 pandemic, as well as the growing
transformational impact of technology on tax services and tax administration overall. Equally, the paper summarises the significant changes over recent years in business practices and societal
expectations with regard to tax; targeted EU and international policy initiatives to address abusive arrangements; and some key legal obligations, constraints and cultural attitudes at national level which are relevant for the work of advisers.

It is important to bear in mind not only that tax advisers do not work in a vacuum but also that there are significant differences between tax advisers. While many are members of a professional
body, such as the members of CFE member bodies, some are subject to mandatory regulation, some accept voluntary regulation, and a significant number are unregulated and without
affiliation to a professional body, in a context where most European countries do not impose market access rules for the provision of tax advice. Our paper concerns the professional behaviour
of all advisers, whatever their status.

The principal objective of the paper is to seek feedback on a proposed “ethics quality bar” based on five short questions that all tax advisers should reflect on when undertaking their advisory role in the overall tax system. Legislators design tax laws; tax administrations apply the law in collecting taxes due; and taxpayers comply with the law, while availing themselves of applicable
rights. Tax advisers play a critical role by exercising professional judgment on taxpayers’ rights and obligations in advising across a range of areas, for example, the relevant aspects of the law,
jurisprudence and administrative matters, as well as the consequences of taking or not taking their advice. The ethical quality of this professional judgment is therefore critical on the question
“If it is legal, is it acceptable?”.

CFE seeks views on whether the five short questions below can help to steer all advisers in the direction of an appropriate balance between the rights and obligations of taxpayers, avoiding
abusive planning. The questions are best read in conjunction with the illustrative examples included in the paper, to have an appreciation of how the questions can be applied to legal and
operational matters common in business contexts.

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