HAPS125 Study Unit 4: Ethics and the Tax Practitioner PDF

HAPS125 Study Unit 4: Ethics and the Tax Practitioner 1. What is Morality? Revolves around the following of rules and regulations From a young age, the idea that you may not steal or commit murder is embedded into us by our parents. “Right” vs “wrong” 2. What is Ethics? Ethics is the syste...

HAPS125 Study Unit 4: Ethics and the Tax Practitioner 1. What is Morality? Revolves around the following of rules and regulations From a young age, the idea that you may not steal or commit murder is embedded into us by our parents. “Right” vs “wrong” 2. What is Ethics? Ethics is the system of moral principles that examines the concept of right and wrong. According to the Oxford Dictionary: Moral principles that govern a person's behaviour or the conducting of an activity Why do we act the way we do? E.g.- Why do people steal? What governs them to stop them from stealing/ committing fraud in a taxation/ payroll environment? In ethics, we investigate the “why”. 3. Business Ethics A business can not be “ethical” or “unethical”-rather, it is the employees of the business that can act ethical or unethical. Business ethics is the application of ethical values to business behaviour. Managers must manage what is right and wrong, taking into account that there are different religions, cultures, races and people working together. A business must endeavour to develop a code of conduct, which reflects the generally accepted behaviour, based on the organisational values. An ethical dilemma involves a situation where a decision-maker has to decide what is the ‘right’ or ‘wrong’ thing to do. Different people means that there are different moral viewpoints of what is “right” and what is “wrong”. 4. King Code The King Code is in essence a corporate governance instrument that has ethical principles contained in it. Businesses can use the King Code to develop their own Code of Conduct A Code of Conduct is also called a Code of Ethics. 5. Code of Conduct Code of Ethics/Conduct -It helps personnel to identify areas where ethical pressures may exist and provides a recommended course of action for their resolution. Also, it is formal way in which an employer provides employees with set of rules stating exactly what the organisation expects of them with regard to their conduct while acting on behalf of the organisation. Governs how employees, management and stakeholders should act in terms of: 1. The usage and management of resources and their relationships with customers and suppliers. 2. Their dealing with competitors 3. Their dealing towards the community (Corporate Social Responsibility- CSR) When performing duties within the organization, or when representing the organization, employees will be bound by the code of ethics. 5.1 Values Normally in a Code of Conduct 1. Integrity: means being straightforward, honest and truthful in all professional and business relationships.When a person does what they say they do. 2. Objectivity: Objectivity means not allowing bias, conflict of interest, or the influence of other people to override your professional judgement. To not be subjective, biased or inclined to something. 3. Professionalism: To act with dignity and professionally with stakeholders, employees and customersThis requires you to comply with relevant laws and regulations. You must also avoid any action that could negatively affect the reputation of the profession.. 4. Fairness: To be reasonable and impartial, treating everyone the same without favour or bias. 5. Accountability: Taking responsibility for one’s actions and not blaming someone or something else. 6. Competence: To have the necessary skills and knowledge to be able to perform what has been promised. 7. Diligence: A person should take al reasonable steps to act ethically and exercise proper care. 8. Transparency: Management should not make arbitrary decisions without consulting employees within the business. 5.2 Requirements for an Acceptable Code of Ethics 1. Makes provision for the resolution of internal conflicts. 2. Provides guidance on ethical decision-making 3. Provides clear guidance on acceptable and unacceptable conduct 4. Encourages ethical behaviour of employees, even if at the expense of the business. 5.2 Internal Controls in a Business Preventative: Deter undesirable events from occurring Detective: To warn about events after they have happened Corrective: To correct the effects of undesirable events Directive: To cause or encourage a desirable event to occur 5.3 Internal Controls- Practically a) Separation of Powers- a single individual can not be responsible for the entire payroll. The person who records the payroll and manages it, must be different from the person who authorizes the payments etc. Example of a preventative internal control method. b) Quality Control: Investigating what lowers the quality of product or service. c) Audits: Internal or external, focused on ensuring that data sets, records, processes are accurate as they are described. Examples of detective control methods. 6. Professional Bodies There are several professional accounting bodies that also prescribes a code of ethics/ conduct when joining them. CIMA: Chartered Institute for Management Accountants IRBA: Independent Regulatory board of Auditors SAIT: South African Institute of Taxation SAICA: South African Institute of Chartered Accountants SAIPA: South African Institute of Professional Accountants ACCA: Association of Chartered Certified Accountants 6.1 Advantages of Belonging to a Professional Body Professional recognition (If you belong to the body you prescribe to a certain standard they prescribe) Technical assistance Supporting standards for education and training Assistance with continuing professional development (CPD) Updates on changes in legislation Building the brand of the profession Representation of other relevant stakeholders. Networking opportunities 6.2 Professional Codes of Conduct An Accountant should adhere to the highest standards of professionalism and confidentiality towards its clients. An accountant should be: a) Impartial and objective b) Keep client’s affairs confidential. c) Exercise due diligence d) Be honest with the client (Full disclosure) 7. Ethics for the Tax Practitioner Tax Evasion v Tax Avoidance: Tax Evasion: Illegal activities deliberately undertaken by a taxpayer to not pay tax. Example- Omits income from his income tax return. Tax Avoidance: When a taxpayer has arranged his tax affairs in a legal manner to reduce his income for tax payable. Example- Tax planning to reduce income on tax payable. As long as something is done in terms of the Tax Administration Act or other legislation, it will be tax avoidance. 8. Regulation of Tax Practitioners Introduced by the Minister of finance in 2002. Goal: To ensure taxpayers receive advice that is consistent with tax legislation. Tax administration Act 28 of 2011 promulgated. Section 240 states when a person should register as a tax practitioner: Any person that gives advice in terms of the tax act or files a return on behalf of another person Must register with SARS in the prescribed manner and form within 21 business days after that person first gave advice or completed a return. 8.1) Who need not register as Tax Practitioners? 1. Completing a return/ advise with no consideration for himself (No money paid for it). 2. When advice is given during a lawsuit with SARS 3. Advice is incidental or subordinate to providing goods 4. Advice is rendered under the supervision of a tax practitioner 5. Employee of a tax practitioner Acknowledgement of Sources The Institute of Certified Bookkeepers (ICB): ICB Junior Bookkeeper: Payroll and Monthly SARS returns- Learning Module 10 issued slides and textbook. Oxford Dictionary Investopedia SARS Tax Practitioner Readiness Program Tax Administration Act 28 of 2011 Thank You!