he classic case of a Ugandan businessman’s understanding of who a tax consultant is, is one that amazes me.
It is the misunderstanding or even outright ignorance surrounding the roles of accountants and tax lawyers in tax advisory and services.
And I think this absurd misapprehension is to blame as one of the reasons why we have continuously seen businesses fail either due to tax troubles or corporate governance related problems that end up swallowing businesses which have not been competently advised for years.
The engagement of one man accountancy firms for both audit and tax services by many SMEs has them ending up saddled with unending tax problems, a phenomenon not observed with large tax payer companies which retain the “BIG FOUR” audit and Tax firms or which employ specialist tax lawyers to run their tax compliance departments.
I think the best explanation for my argument is this; The “BIG FOUR” audit and tax firms do not hold out accountants as all round tax experts but rather form teams of both tax accountants and Lawyers and task the teams to render comprehensive tax advice to their clients.
An accountant may prepare income tax returns except where substantial questions of law arise which are then competently determined only by a tax lawyer employed in-house to advise the firm’s tax compliance department.
However strange this might sound, it is not uncommon in Uganda to find a brave accountant taking on URA’s army of experienced specialist tax Lawyers in tax disputes before the tax appeals tribunal. A notion a kin to taking a knife to a gunfight, even where high stakes are involved.
I think it is unethical for an accountant not to advise a trader to retain legal counsel for purposes of proceeding before the adversarial tax tribunal or even the Commissioner General’s objections department and for such an accountant instead to opt to face off with URA’s experienced tax lawyers, even going as far as advancing arguments to complicated questions of law.
While is it is common for experienced accountants to have a better understanding and knowledge of tax law transcending that of most main stream generalist lawyers.
I find it preposterous for a trader to permit an accountant to represent them before a tax tribunal or to render technical legal advice on complex questions of law.
Taxation being a hybrid of law and accounting, the accountant may have jurisdiction over incidental questions of law arising from and in connection with audits or the preparation of returns as an expert witness before a tax tribunal but he or she shouldn’t render legal advice on questions of law that are best redirected to a specialist tax lawyer as this may gravely disadvantage the tax payer and result into onerous commercial consequences that are sometimes irreversible.
As already noted, tax lawyers and CPAs do render a more effective tax service when they form teams, just as the Big Four accounting and audit firms do.
However, proceedings in the tax appeals tribunal, which is an adversarial adjudication tribunal, involves complex tax legal issues that are best tackled by a tax lawyer.
Wherever there arises questions of interpretation in the field of accounting that can only be clarified by a CPA, it would greatly benefit the tax payer if their case is worked on by the combined skills of both a tax lawyer and a CPA who may be lined up as an expert witness.
Tax is a creature of statute and many of the principles in the statutes have received diverse technical interpretation by the courts for centuries now and what might appear plain and straight forward on the face of the statute will more often than not, turn out to be a complicated legalese affair, much more complex than what a lay man would comprehend by just reading what appears like plain English language.
Tax law is also by far the most complex area of law, even for seasoned senior lawyers without a specialty in the field.
And the fact that tax statutes are constantly being amended fortifies the argument that tax advice is best taken from specialist tax Lawyers who are constantly updated and well versed with the development of the law.
All the above is why comprehensive tax advice is best given by a tax lawyer with training in accounting or a team comprised of both a tax lawyer and an accountant.
Commercial accounting principles do not override tax law. When a tax payer faces off with the tax man over questions of whether tax assessed is due, what quantum of tax is due or whether a revenue expense or a claimed capital allowance is allowable under the Act, that becomes a legal dispute between the tax payer and the Commissioner General which may only be resolved in adjudication and the consultant needed is a tax lawyer not an accountant.
The accountant’s role should end at compliance and never spill over into dispute resolution.
This is because in as much as Taxation is a hybrid of law and accounting, the roles of a CPA and that of a tax lawyer are distinguishable.
Whereas both CPAs and Tax lawyers can help with tax planning, financial decisions and minimising tax penalties, a CPA is better suited to advise on the financials and numbers side of compliance.
A tax lawyer’s primary training focus is minimising tax liability through aggressive tax planning, which simply stated, is organising the tax payer’s affairs in a manner(legal) that will reduce or minimise their tax liability, as well as dispute resolution.
And so a Tax lawyer always must be called in to provide legal advice in the face of problems or a dispute with URA; including an assessment to tax which a tax payer disputes, to challenge URA audit findings like the disallowance of a critical revenue expense or capital allowance which has resulted into a larger than contemplated tax burden.
A tax lawyer is also better suited to defend a criminal charge arising out of tax non-compliance, to render advice on Intercompany transactions and transfer pricing aspects of a tax payer’s corporate structure, to conduct organisation restructure or group reorganization, to render corporate governance advisory and board affairs support, to support in-house accountants in tracking all possible revenue deductions and capital allowances so as to minimize chargeable income, and probably most importantly, to render Investment regulatory and licensing advice necessary to enable a taxpayer take advantage of all trade incentives or exemptions that may be available to them as a matter of government’s investment promotion policy.