Professional trust and estate planning advisers have issued a charter aimed at putting a stop to ‘aggressive’ tax management.
The Society of Trust and Estate Practitioners (STEP) argues professional tax and finance bodies have a key role in working with tax authorities worldwide to develop consistent cross border guidelines that identify acceptable tax management.
STEP’s proposals focus on:
- Stopping abuse by simplifying tax systems
- Drafting better tax law to avoid potential abuse
- More consultation on proposed tax changes
- Responsibility for advisors to warn clients of the dangers of aggressive tax management
- Cooperation between tax authorities and professionals to develop a clear and consistent international approach to stop aggressive tax avoidance.
Taxpayer obligations and rights
STEP intends to work with other international professional bodies to draft a ‘Taxpayers’ Charter’ that reflects current international best practice in taxation for launch later this year.
STEP Chairman Michael Young said: “Fair tax systems must include effective measures to counteract abuse and attitudes towards abusive tax avoidance are toughening across the world.
“ Advisors have a responsibility to recognise this shift and give clients clear warnings of the risks of engaging in schemes that might be considered abusive. Those engaging in such schemes will be challenged by the tax authorities, receive little sympathy in court and may also be vulnerable to widespread adverse publicity.”
“There must always be a clear balance between taxpayer obligations and taxpayer rights. While the obligations on taxpayers need to be enforced effectively, taxpayers have a right to unambiguous tax laws that allow them to plan with certainty – an issue that is receiving relatively little attention at the moment from those campaigning against tax abuse.”
Tax evasion – hiding taxable income from the tax authorities – is criminal, while tax avoidance – planning your affairs to minimise your tax bill – is legal. explains the STEP report Ensuring the integrity of tax systems: Safeguarding taxpayers’ rights, tackling abusive tax avoidance
“If the principle is clear, the distinction between tax avoidance schemes that achieve their intended tax result and those that do not depends on decisions of the courts. In many jurisdictions, judges now adopt a purposive view of tax legislation to ensure that artificial schemes designed to defeat the purposes of the legislation do not succeed. Advisors who promote such schemes may reasonably be accused of mis-selling.
Focus on abusive tax avoidance
“Over the past decade there has been a major move by tax authorities around the world to obtain more information on taxpayers, making it harder to hide funds to evade taxes.
“The focus is now moving to abusive tax avoidance schemes. STEP recognises that a fair tax system must include effective measures to counteract abuse. It is important that tax professionals fully recognise the changing environment in the advice they give to their clients.
“Advisors have a responsibility to give their clients clear warnings of the risks of engaging in schemes that might be considered abusive. Clients engaging in such schemes will be challenged by the tax authorities, receive little sympathy in court and may also be vulnerable to widespread adverse publicity.”