This is a the last part on the role and rules of tax professionals, which last appeared in the New Times of 01/11/2010.

To ensure that we are all on the same footing, we will summarize some of the basic issues that we looked at previously. These are issues that have to be taken into consideration when drafting rules regulating tax professionals:

i. Extent of control over tax professionals,
ii. Maintaining quality standards
iii. Responsibility of the professional for his/her acts or omissions,
iv. Privileged communications made between a professional and the client;
v. Regulation of international consultants;
vi. The chargeable fees.

Today we will discuss these two issues:
- Provision of tax services by employees
- Admission of legal persons to the profession

The next design consideration is whether employees of a given company can provide services which are ordinarily provided by tax consultants. As you know, some companies have accountants or lawyers who are capable to file a tax return or provide legal advice to the companies they serve. How does the Government regulate such persons who are not members of the Accountants’ or Lawyers’ Organization, but able to perform duties done by tax professionals?

Should employees also be required to have same qualifications as the tax professionals?

You will remember that we indicated that employees are usually loyal to their employers than they are to the tax administration or Government (regulator), which suggests the degree with which the regulator can succeed if there was an attempt to put employees under same regulations as those applicable to registered tax professionals.

Scholars have indicated that if governments put in place very strict rules for tax practitioners, it is likely that businesses will prefer to use their own employees than go to registered firms for this these services, hence the need for flexibility.

It is also vital to draw a demarcation between what an employee of a business can perform vis-à-vis services that are performed by registered tax professionals. For example, employees of an organization should not be permitted to audit commercial accounts of the firms they work for, because they lack the independence required even if they are members of the profession/institute. Does this mean that an audit firm should look for a counterpart firm to audit its commercial accounts when it could have done that for itself? The answer to me is yes, if transparency and clean work is to be realized.

The other issue that should be avoided is to switch, i.e. if X and Y are audit firms, then these two firms should not audit each other. 

On a similar note, legal opinion provided by employees working as in-house lawyers, can not be accorded "privileged status” which we saw earlier. When we talk about "privileged information”, we are mindful that this only applies in countries where "privileged information” is recognized.

This therefore means that a business cannot refuse tax administration from perusing through a document prepared by her in-house lawyer(s) on pretext that such information is protected under the "privileged information” framework.

The other issue is admission of legal persons into the professional body. When we talk of legal persons, let it be construed as a company, or any other moral person. Although this is done in some countries like Germany and France, there are policy constraints that tend to come up.

Victor Thuronyi, in the book known as Tax Law Design and Drafting, (which I hope readers of my articles are now familiar with), mentions two vital issues in licensing legal persons as members of the profession:
- Regarding professional quality and the responsibility of individuals working for the organization;
- Independence of the organization from its clients and the rules with respect to conflict of interest, and maintenance of professional ethics.

For these concerns, scholars say that it is not appropriate for legal persons to act as members of professional bodies.
But how have countries like France and Germany managed to license legal persons as members of professional bodies? 

Law No. 90- 1258 of December 31, 1990 regulates practice of corporate as professionals in France.  Article 10 of this law provides that, two-third of members of a corporate are required to be members of the profession.

If the company has three members, then two of them should belong to the professional group, which could be accountants, lawyers, engineers etc. It should be emphasized that the French Law mentioned above does not only talk about tax professionals, but it refers to a cross section of professions.

Pertaining to voting rights, companies do not vote per se. Instead, it is the members of companies that vote. Companies may have both professional and non-professional members, when it comes to voting it is only members of such companies who are professionals that are allowed to vote. This then answers concerns which have been raised by scholars.

At this time, any one can easily guess how other issues of professional ethics which is also a concern that has been raised may be handled, given the number requirement of shareholders who have to be members of the relevant profession. 

For those who have not been able to read all the parts of this article, please log to www.millenniumlawchambers.com and click to articles, then you will be able to find all the parts.

Finally, I should say that I am humbled by compliments from readers of my articles, particularly   Christian, a Chartered Accountant practicing in Canada, Lee from Seoul, who is also an accountant and Gorge, a student on internship at Rwanda Development Board. 

stephen.zawadi@millenniumlawchambers.com

Mr Zawadi is a Managing Partner-Consultant at Millenum Law Chambers