ETHICS IN PROFESSIONAL FIELDS OF PRACTICE …

1 ETHICS IN PROFESSIONAL FIELDS OF PRACTICETHE TAX PRACTITIONERWEBINAR 2. 25 August 2017 Presented by AdvWerner BouwerAGENDAAGENDAPRESENTATION 1 -THE & INTRODUCTIONPREVIOUS SESSION RECAP INFLUENCE OF CULTURE ON ETHICAL DECISION MAKING PROCESS COMPLIANCE & THE LAW RATIONALISATION WHAT TO DO WHEN CONFRONTED WITH TAX EVASION .. THE LAW INFLUENCE OF CULTURE ON ETHICAL DECISION MAKING .. compliance is there to reinforce culture and it also demonstrates why those who advocate a paper compliance program are wrong. It is the doing compliance, not simply having it on paper, that makes it all work. Tom Fox 10 Feb 17 DEFINITION OF CULTURE:It is the pattern of responses discovered, developed or invented during the group s history of handling problems.

2 These responses are considered the correct way to perceive, feel, think and act .. Culture determines what is acceptable or unacceptable, .. right or wrong, .. Thank You for Being Late, Thomas Friedman INFLUENCE OF CULTURE ON REPUTATION OF YOUR PROFESSION? DEFINITION OF CULTURE:It is the pattern of responses discovered, developed or invented during the group s history of handling problems which arise from the interaction of its members, and between them and their environment. These responses are considered the correct way to perceive, feel, think and act, and are passed on to new members through immersion and teaching. Culture determines what is acceptable or unacceptable, important or unimportant, right or wrong, workable or unworkable.

3 Thank You for Being Late, Thomas Friedman KING IVTMC ulture how things are really done around here, not how it is said to be doneRELATIONSHIP BETWEEN LAW & CULTURE .. compliance is there to reinforce culture and it also demonstrates why those who advocate a paper compliance program are wrong. It is the doing compliance, not simply having it on paper, that makes it all work. Tom Fox 10 Feb 17 MFMA has the strongest criminal measures against malfeasance. Yet, municipalities have the most qualified audit reports. Very little prosecutions itoMFMA, after 14 years. PFMA: Took the NPA approximately 15 years of endless reports on billions of irregular expenditure year on year; to muster the courage for the 1stprosecution.

4 PRECCA is one of the strongest pieces of anti-corruption legislation in the world. Yet, after 13 years, there are not one name reflected on the Register of Tender Defaulters .. With the World Bank audits, we get full marks for having the rules on AML. Yet, we flunk the walk the talk test. RELATIONSHIP BETWEEN LAW & CULTUREThe Rule of Law concept does not refer to whether the law itself exists. Its existence is merely the 1ststep. Rule of Law means how that what there is, is fearless but fair application of the law -Is the doing part setting the example Is the pattern of responses discovered, developed or invented Determines what the public perceives are right or wrong. That is why ethical pioneers are all ad idem -The law s existence does not help if no-one does nothing, there is nothing (SCOPA Chair) Biggest barrier to root out corruption is the sense of impunity of some (Madonsela)RATIONALISATION IS A SLIPPERY SLIDEEasy to think but everybody is doing it.

5 Easy to point and blame ..Some questions .. The member also has duties to the country and thefiscus, notably of compliance with the law and the honest presentation of taxpayer client s TO DO WHEN CONFRONTED WITH TAX EVASION? REPORTING DUTY? Members must comply with statutory duties of legal disclosure where they have proof or suspicions of criminal activity. Members must maintain the confidentiality of their employer and clients and should not disclose information to a third party without an employer or client s permission, unless there is a legal obligation to do so. 235. Criminal offences relating to evasion of tax.(1) A person who with intent toevade or to assist another person to evade tax or to obtain an undue refundunder a tax Act a)makes or causes or allows to be made any false statement or entry in a return or other document, or signs a statement, return or other document so submitted without reasonable grounds for believing the same to be true; b)gives a false answer, whether orally or in writing, to a request for information made under this Actc)prepares, maintains or authorises the preparation or maintenance of false books of account or other records or falsifies or authorises the falsification of books of account or other records; d)makes use of, or authorises the use of, fraud or contrivance.

6 Or e)makes any false statement for the purposes of obtaining any refund of or exemption from tax, is guilty of an offence and, upon conviction, is subject to a fine or to imprisonment for a period not exceeding five years. THE TAA S 235 (1)THE TAA S 235 (3)(3) A senior SARS official may lay a complaint with the South African Police Service or the National Prosecuting Authority regarding an offence contemplated in subsection (1).(2) Any person who makes a statement in the manner referred to in subsection (1) must, unless the person provesthat there is a reasonable possibility that he or she was ignorant of the falsity of the statement andthat the ignorance was not due to negligenceon his or her part, be regarded as guilty of the offence referred to subsection(1).

7 THE TAA S 235 (2) The suspect carries the burden to prove the absence of culpability. Must prove two things (cumulatively) 1 he/she was ignorant of the lie2 ignorance was not due to negligence on his/her part. Negligence the bonus paterfamilias test (or reasonable person in his / her shoes). Members must not knowingly be associated with reports, returns, communications or other information where he/she believes that the information: contains a materially false or misleading statement; contains statements or information furnished recklessly; omits or obscures information required to be included where such omission or obscurity would be misleading. When a tax registered practitioner becomes aware that the above has occurred he must cease to represent the taxpayer concerned if the taxpayer does not remedy the situation.

8 WHAT TO DO WHEN CONFRONTED WITH TAX EVASION? OTHER? This Code explain the position of members if a client refuses to act in accordance with the member s advice, for example where the client has unreasonably delayed either the production of information needed for the preparation of returns or accounts or full disclosure of irregularities. The member should consider whether to continue to act for the client but should note the recommendations contained in the Code regarding termination of relationships with the client. A member should deal with taxation work only on the basis that the client is prepared to make full disclosure to him. Such disclosures are governed by confidentialityas an implied contractual term.

9 SHOULD A PRACTITIONER INVESTIGATE ALL DISCLOSURES OF CLIENT FOR THE TRUTH? Members must keep proper working papers and files of PROFESSIONAL work done to support, for example, the tax return, opinion and other advice given. Members must comply with the SA Tax Standards. It is also compulsory to perform a critical evaluation and apply PROFESSIONAL scepticism to the information submitted to the member. For example, a member should scrutinise the bank statements of client taxpayers for completeness of income declared. SHOULD A PRACTITIONER INVESTIGATE ALL DISCLOSURES OF CLIENT FOR THE TRUTH? Suspicion = state of conjecture or surmise where proof is lacking. I think but I cannot prove .. It is the starting point of an investigation.

10 SCA caseProfessional scepticism = attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatementdue to error or fraud, and a critical assessment of .. evidence .Value judgment / case by case basis / PROFESSIONAL judgment ..Investigation = .. to determine the truth .. Members must consider the money laundering statutory reporting requirements. Where members become aware of tax irregularities, they must consider that under the money laundering legislation, fiscal offences can amount to money laundering and act appropriately. A member who has knowledge of or reasonable grounds for suspecting money laundering must consider whether he has an obligationto make a report to the appropriate authorities.