Ethical Aspects in Tax Administration

Ethical Aspects of Tax
Administration

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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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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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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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.

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

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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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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Administration
Examining the Pillars
Fairness;
Equity;
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Administration
Examining the Pillars
Transparency
Accountability
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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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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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Administration
Code of Conduct:
The Standard of behavior expected of the employee of the TA in the performance of their duties. The code provides
guidance to employees as they make decisions both personal and professional.
Code of Ethics:
Statements of principles meant to influence behavior.
Codes of conduct and ethics have become the order of business as organizations and businesses seek to assure their
stakeholders that their organizational/business practices are ethical. The codes aim to:
1.
Standardize behavior;
2.
Establish minimal standard of conduct;
3.
Formalize existing practices
Enforcement System;
It does not make sense implementing codes of standard and ethics without a system to monitor and enforce the rules
and guidelines. An effective enforcement system should have the following characteristics:
1.
2.
Written and (legally) enforceable code;

Clearly defined penalties for infractions;
-minor offenses (administrative discipline and punishment);
-fraud and corruption (prosecution);
3.
Obligation to Report (Protection of Whistleblower);
4.
A continuous education system that creates awareness of responsibility for both the taxpayer and the public;
5.
An independent monitoring system/mechanism to ensure compliance.
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Administration
Appeal System
An appeal system is fundamental to an effective tax system.
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Administration
Ethical Standards for Tax Administrators
1.
2.
3.
4.
5.
(Adapted from the Institute for Supply Management)

Avoid the intent and appearance of unethical and compromising
practices;
Avoid any professional or business activity that creates a conflict
between personal interest and the Tax Authority;
Avoid soliciting or accepting loans, money, credit or preferential
discounts and the acceptance of gifts, entertainment, favors or
services;
Handle confidential information with due care and proper
consideration of ethical and legal ramifications to the tax authority;
Be knowledgeable of the law and apply it impartially, consistently
and in the spirit intended.
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Administration
Code of Conduct for TA: (Louisiana Association of Tax Administrators):
Tax Administrators shall:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Obey all laws relating to taxation and grant no exemptions, credit or advantage to any taxpayer that is not
provided by the law;
Be dedicated to the highest ideal of honesty and integrity in all matters in order to maintain the respect and
confidence of the government and taxpayers;
Strive to be impartial, fair, neutral and consistent in administering the law without regard to race, social or
economic circumstance;
Provide prompt, efficient and quality service to all stakeholders in an effort to exceed their expectation;
Refrain from actively participating in partisan political activities;
Accurately record proceedings and maintain taxpayer information in the strictest confidence and highest level
of security;
Refrain from soliciting gifts for actions and non-actions;
Make reasonable effort to collect the proper amount of tax revenue due at the lowest possible cost to the
state, and in a manner that warrants the highest degree of confidence in our integrity, efficiency, effectiveness
and fairness;
Respond to valid taxpayer refund claims with the same diligence as employed in collection of taxes;
Educate taxpayers on their rights and responsibilities to ensure the highest possible levels of voluntary
compliance to the laws.
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Administration
Other Administrative Practices to encourage adherence to the standards (Adapted
from the Anti-Corruption Resource Centre www.u4.no)
Standardization of procedures and forms

1.
Reduce discretion of officials and limits number of approvals;
2.
Limit one-one/out of office contact with the taxpayer;
3.
Internal controls;
4.
Performance Standards.
Simplification of the Tax System
1.
Simple and clear rules;
2.
Few exemptions;
3.
Concerted effort to remove ambiguities/loopholes.
Professionalism
1.
No political appointments;
2.
Recruitment/promotion on merit;
3.
Responsibilities clearly defined (job description manuals);
4.
Segregation of duties;
5.
Staff rotation and continuous training schemes.
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Ethical Aspects in Tax Administration

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Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Balances good or harm;

Ethical action creates greatest good over harm.

Ethical action respects and protects an individuals rights.

Ethical action treats all humans fairly.

Ethical Action should contribute to the common good of society.

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Ethical Aspects of Tax

Written and (legally) enforceable code;

Ethical Aspects of Tax

Ethical Aspects of Tax

(Adapted from the Institute for Supply Management)

Ethical Aspects of Tax

Ethical Aspects of Tax

Standardization of procedures and forms

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