Ethical Aspects of Tax

Administration
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Ethical Aspects of Tax
Administration
Ethics What is it?
A standard of behavior that instructs
human beings on their action in
different situations. These standards
are important for relationships
between the individual and the
society at large including:
Family (spouse, parents, children);
Church;
Business (clients, employer, employee;
suppliers, government agencies)
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Ethical Aspects of Tax
Administration
Ethics are commonly mistaken for:
1. Law the law can guide or impose
ethical action, but the law is not always
ethical. In cases where the law serves
the interest of a few or provides
ultimate power (Apartheid,
communism);
2. Culturally accepted norms Some
cultural practices are not ethical such
as honour killing, slavery, caste system.
Some cultural practices have evolved
into ethical standards and law.
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Ethical Aspects of Tax
Administration
How are ethical standards established?
Five approaches have been suggested (Adapted from Santa Clara University
www.scu.edu);
1. Utilitarian Approach
Balances good or harm;
Ethical action creates greatest good over harm.
2. The Rights Approach
Ethical action respects and protects an individuals rights.
3. The Justice Approach
Ethical action treats all humans fairly.
4. The Common Good Approach
Ethical Action should contribute to the common good of
society.
5. The Virtues Approach
Ethical action
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Ethical Aspects of Tax
Administration
The different approaches may not answer what is ethical
however each approach gives us important information
to determine what is ethical in a particular situation,
more often than not the different approaches lead to
similar answer.

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Ethical Aspects of Tax
Administration
Tax Administrators are in a powerful position the law gives
them the authority to:
Asses taxes (including Best of Judgment);
Collect Revenue;
Seize Property;
Garnish Bank A/cs;
Commence legal (criminal/civil) proceedings against the
taxpayer.

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Ethical Aspects of Tax
Administration
Exercise of that power can result in the following against the taxpayer:
Loss of property and income;
Imprisonment;

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Ethical Aspects of Tax
Administration
As with all professions and field of
business that require human interaction
and judgment, there are ethical issues
facing tax administration.
These issues must be identified and dealt
with, particularly as we have noted that
Tax Administrators have considerable
power and that the exercise of that
power can result in the loss of some of
the fundamental human rights of the
taxpayer.
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Ethical Aspects of Tax
Administration
It has been widely written about and
agreed that the pillars of tax
administration are:
1. Fairness;
2. Transparency
3. Equity;
4. Accountability.
And these are what should guide the tax
administration and its relationship
with public/stakeholders. Ethical
aspects of tax administration
largely surround this four pillars.
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Ethical Aspects of Tax
Administration
Examining the Pillars

Fairness;

Equity;

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Ethical Aspects of Tax
Administration
Examining the Pillars

Transparency

Accountability

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Ethical Aspects of Tax
Administration
Under the four pillars, some of the ethical issues
facing TA:
1. Acceptance of gifts;
2. Conflict of Interest;
3. Selective application of the law/ or
inconsistency is applying the law;
4. Political influence;
5. Confidentiality/secrecy;
6. Discretion;
7. Corruption;
8. Lack of Autonomy
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Ethical Aspects of Tax
Administration
Tools for Balancing the Pillars and dealing with the
ethical aspects of Tax Administration.
1. Ethical Standards and Principles;
2. Code of Conduct;
3. An Effective Enforcement System;
4. An Effective Tax Appeal System

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Ethical Aspects of Tax
Administration
Ethical Standards for Tax Administrators (Adapted from the
Institute for Supply Management)
1. Avoid the intent and appearance of unethical and
compromising practices;
2. Avoid any professional or business activity that creates a
conflict between personal interest and the Tax Authority;
3. Avoid soliciting or accepting loans, money, credit or
preferential discounts and the acceptance of gifts,
entertainment, favors or services;
4. Handle confidential information with due care and proper
consideration of ethical and legal ramifications to the tax
authority;
5. Be knowledgeable of the law and apply it impartially,
consistently and in the spirit intended.
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