Tax Avoidance and the Accountant’s Professional Duty: A Review

There is a substantial body of literature in the business ethics field dealing with the ethics of tax avoidance. Some of this literature extends the ethical inquiry to the tax professional, arguing that participation in tax avoidance activities is contrary to the accountant’s professional duty, both in terms of their duty to the public welfare as well as their duty to follow proper accounting practices. The existing literature usually argues from the premises that tax avoidance is detrimental to society, and that the accountant has a largely undefined duty to the welfare of society. If those premises are accepted, the conclusion in the existing literature that participation in tax avoidance activities violates the accountant’s duty to the public interest is unavoidable. It is also argued that accountants have a duty as professionals which would preclude engaging in tax-avoiding activities, irrespective of its impact on the wider society. This paper reviews the existing literature which addresses these topics and evaluates the premises and conclusions which have been largely accepted in the literature. The commonly cited harms to the public interest caused by tax avoidance are reviewed, and the origin, nature, and codification of the accountant’s professional duty are examined. It is argued that not only are the harms caused by tax avoidance often mis- or overstated, but that the professional duty of the accountant is misspecified as well. Since these are critical premises to the argument that tax avoidance represents a violation of the accountant’s duty to the public interest, the questionable validity of those premises leads to serious reservations about the validity of the conclusion. This paper does not argue that tax avoidance is either ethical or unethical, good or bad, moral or immoral. The sole purpose of this paper is to examine whether it is correct to argue that the accountant’s professional duty to the public interest would prohibit condoning or participating in tax avoidance activities.