Jens Poll, Task Force Chair - PowerPoint Presentation

1. Jens Poll, Task Force ChairIESBA CAG Meeting, March 7, 2022Tax Planning & Related Services

2. Objectives of the Session 2To provide feedback on the Task Force’s preliminary consideration of:Matters relating to the ethical behavior expected of PAs performing tax planning and related services (TP); and The framework to guide their ethical judgments and actions when providing such services

3. Agenda of the Session3Agenda of the Session

4. 4CONTEXT

5. ContextReason for this project:Recognize that PAs play a significant role in providing TP servicesRespond to public interest (PI) concerns about perceived improper TPPI benefits of PAs being involved in providing TP servicesSupport and enhance effectiveness of the tax systemEnhance and facilitate compliance with tax laws and regulationsNature of PA’s PI responsibilityServing the interests of the client or employing organization in accordance with L&RAlso balancing the interests of the jurisdiction’s treasuryCode provisions to complement existing regulatory frameworks addressing TPGeneral Anti-avoidance Rules (GAAR) (jurisdictional specific)OCED BEPS (Global)5

6. 6FUNDAMENTAL ISSUES

7. What is Tax Planning?Comprises a broad range of services provided to the client/employing organization on how to structure their tax affairs in the most tax-effective mannerOECD “Arrangement of a person's business and /or private affairs in order to minimize tax liability”UK HMRC “Involves using tax reliefs for the purpose for which they were intended”CFE “Focus on delivering savings to clients using legal vehicles and financial transactions specifically established to exploit these technicalities”7

8. Broad Spectrum of Tax Planning8ETHICAL CONSIDERATIONSFOCUS OF PROJECT

9. Focus on Gray ZoneGray zone not necessarily illegalWhy do PAs need to understand and be ethically mindful of the gray zone?Issues around “the gray zone” can create threats to compliance with the fundamental principles (FPs)PAs have a responsibility to comply with the Code9“Uncertain”“Improper”

10. 10Gray Zone – Fundamental Principles ImpactedIntegrity, e.g.:Self-Interest threatIntimidation threat Advocacy threat Objectivity, e.g.:Self-Interest threatIntimidation threatAdvocacy threat Professional competence/due care, e.g.:Self-Interest threatIntimidation threatProfessional behavior, e.g.:Self-Interest threatIntimidation threat

11. 11INDICATORS OF GRAY ZONE

12. 12Various indicators of uncertainty:Tax legislation Gaps in the current legislation New and recent changes which can be subject to different interpretationMulti-jurisdictional scope (Complexity from technical or legal point of view)Challenges to previous court rulingsNo legal precedentRecent court or tax rulings that cast doubt on similar arrangementsConflicting laws within and across jurisdictionsNew business models Pace and impact of technologyChanging business landscape: e-commerce, cloud-based transactions, etc.Public perceptions influencing what is considered “improper”Gray Zone – “Uncertain”

13. Improper? Aggressive? Unacceptable? Egregious?May be able to approach description through indicators/factors:Lack of clarity about who the client is or troubling information about client or management integrityTransactions are artificialWithout genuine commercial purpose (substance over form)Reason to believe, based on facts and circumstances, that it is clearly not in the spirit of the lawLack of transparency to relevant tax authoritiesLack of adequate factual basis (incomplete, unsupported, factually incorrect)Common indicators of improper tax planning in the relevant jurisdictionE.g., Clearly exploiting gaps in tax laws and regulationsE.g., Double non-taxation, unreasonably high pricing of intangibles (royalties), etc.13Gray Zone – “Improper”

14. Matters for ConsiderationIESBA CAG representatives are asked to share any comments, questions, or reactions to the TPTF’s preliminary views 14

15. 15RESPONSE FRAMEWORK

16. Overview of Response FrameworkConduct expected of PAs under the CodeIdentification, evaluation and consideration of relevant facts and issuesIdentification of risks and potential mitigating strategiesDiscussions with management/TCWG including consideration of transparency to relevant authoritiesEvaluation of management’s/client’s responseIs it adequate? Need for escalation?Consultation (internally/externally)What further action?16

17. 17Response FrameworkScenario: Professional Accountant in Public Practice: Client communicates their intent to maximize tax benefits

18. Response Framework 18Scenario: If disagreement arises ClientPA to consider relationship with client (i.e., continuance or resignation)Communicate with management and, where appropriate, TCWGDocument discussions and decisions If resigning, disclose resignation to relevant parties if required by law or regulationExpectations of PA’s responseEmploying OrganizationConsider communicating with TCWG (where appropriate)Consider relevant internal or external escalation measures:Consult with peersConsider company whistle-blowing policiesReport to the internal and/or external auditorsSeek legal and professional body’s adviceConsider resigning

19. Matters for ConsiderationIESBA CAG representatives are asked to share any comments, questions, or reactions to the TPTF’s preliminary views 19

20. TimelineSeptember 2021September 2022December 2022June 2023 September 2023December 202120March 2022April 2022December 2023June 2022

21. GLOBAL ROUNDTABLESThree virtual global roundtables:Monday April 25 11 am-3 pm EDTTuesday April 26 8 am-12 pm EDTThursday April 28 12-4 am EDT21

22.