TPB presentation National Tax Practitioners Conference 2014 - Drivers - PDF document

TPB presentation National Tax Practitioners Conference 2014 - ‘Drivers for change’ 17 June 2014 at 2:40pm in Sydney. Presented by the Acting Chair of the Tax Practitioners Board (TPB), Professor Cynthia Coleman Topic Challenges for regulators – it is not just tax practitioners that will need to evolve, the role of the regulators in the tax system will also need to adapt. Key presentation points 1. While the environment is changing and evolving, the role of the TPB and the obligations and responsibilities of tax practitioners remains the same. 2. The TPB will need to adapt to recognise changing business practices (arising from technological improvements and globalisation of the tax system). 3. How does the Code of Professional Conduct apply in this evolving environment? Opening remarks • The focus of this conference is to discuss fundamental shifts into the next decade for the tax practitioner environment. As we have seen already and can anticipate, these shifts will be significant are changing rapidly. It is therefore important that these shifts are understood and embraced so that we can leverage off the benefits that will inevitably arise. • The number of shifts and initiatives are numerous and for the purpose of my presentation today, I will be focussing on the impact of technology and the prevalence of off shoring arrangements, as the global ‘marketplace’ continues to expand rapidly. • The program outline for this session talks about not just tax practitioners needing to evolve, rather the role of the regulators in the tax system will also need to also. • Considering what this may mean goes to a consideration of the purpose of the TPB, and we uphold this purpose in how the TPB interprets and acknowledges different business practices. What does change however is how the TPB interprets business practices to ensure that tax practitioners continue to meet appropriate standards of professional and ethical conduct. • Our primary purpose is consumer protection. We give assurance to users of tax services that the registered practitioners they engage have the necessary skills and ability to provide them with a competent service. We cannot see this purpose changing. Background information – scene setting • In March 2010, the TPB replaced the six separate State-based Tax Agent Boards and also commenced the registering and regulating BAS agents. • From 1 July 2014, the TPB will also commence the registration and regulation of financial advisers who provide tax advice in the context of providing financial advice services (tax (financial) advisers). • Currently, there are approximately 55,000 registered tax practitioners: o 39,000 tax agents and 16,000 BAS agents (made up of individuals, companies and partnerships). • Australia’s tax regulatory environment is multifaceted, resulting in a high level of interaction between taxpayers and tax administration. • Individual taxpayers – high proportion lodge annual income tax returns: o 12.6 million individual income tax returns lodged in 2010-11

o 71% of these, or around 8.95 million, are lodged by tax agents. • Other entities (companies, partnerships, trusts, super funds): o 2.3 million income tax returns lodged in 2010-11 o 90% of these, or around 2.07 million, are lodged by tax agents o plus activity statements (mainly quarterly) and various other returns. • With statistics such as the above, the role of tax practitioners and those that regulate them is of utmost importance. Regulatory objective • Our objective is to ensure that tax agent services provided by tax practitioners are provided to the public in accordance with appropriate standards of professional and ethical conduct. • Apart from ensuring practitioners have the necessary educational qualifications and experience, Coupling the educational qualification and experience requirements for tax practitioners, there is an overarching compliance framework to complement this. • At the core of this compliance framework is the legislative Code of Professional Conduct. • The Code comprises of the following five key principles: o honesty and integrity o independence o confidentiality o competence, and o other (professional) responsibilities. Code of Professional Conduct • As previously stated, I am of the view that the role of the TPB does not change, and indeed the obligations and responsibilities of tax practitioners, in the face of fundamental shifts in the tax practitioner environment, remain largely the same as well. • To demonstrate this point, I would like to draw upon two obligations that exist under Code of Professional Conduct. In particular: o Code item 6: confidentiality and the on-disclosure of client information without consent o Code item 10: taking reasonable care to apply tax laws correctly. Code Item 6 – confidentiality • Elements o Unless there is a legal duty to do so, tax practitioners must not disclose any information relating to a client’s affairs to a third party without the client’s permission. o Information refers to the acquiring or deriving of knowledge and includes, but is not limited to, capturing information known about a client. o Importantly, the information does not have to belong to the client, or have been directly provided by the client to a registered agent. It is only necessary that the information relates to the affairs of a client. o A third party is any entity other than the client and the registered agent and may also include entities that maintain offsite data storage systems (such as ‘cloud storage’). • Example o It is common practice for Australian firms to minimise their operating costs by entering into agreements with overseas business to assist in the performance of certain accounting and bookkeeping services. o Consistent with the increasing use of global businesses and smarter technology, it is foreseeable that such arrangements will only increase, it is just a matter of by how much. o Under Code item 6, such arrangements are not prohibited, however, in order to send client information to overseas, the Australian firm must disclose its arrangement with the overseas firm, perhaps in a letter of engagement, and obtain the explicit permission of their clients. o Subject to the terms of the agreement, the Australian form will have primary responsibility for the provision of the relevant tax agent services, including the work undertaken by the overseas firms. o Therefore, regardless of whether you are sending client information to Parramatta or Brazil, the role and obligations on tax practitioners remain unchanged and the manner in which the TPB ultimately views these arrangements is unchanged.