Tax evasion damages our societies and has to be fought against – How professional regulation can help

The European Tax Adviser Federation (ETAF) welcomes the Pandora Papers revelations because they have shown that there is still much to be done in the fight against tax fraud.

In the wake of this new tax scandal, the European Parliament adopted during its Plenary session on 21 October 2021 a resolution calling on the EU to draw the lessons from the Pandora Papers.

ETAF supports the ambitious approach set out in the text and recognizes that combatting tax fraud and evasion as well as strengthening the administrative cooperation between Member States in relation to taxes are of primary importance.

Tax evaders involved in the Pandora Papers should not get away with it and the tax administrations in Member States should thoroughly analyse the data leaks and launch criminal investigations where it is necessary.

Benefits of self-regulation

However, ETAF is also concerned about some statements. Among other things, the EP resolution states that “the self-regulation and supervision of these professions has not been effective in ensuring compliance and sanctioning breaches of the law”.

ETAF profoundly disagrees with this assessment. In the ETAF Members, where the profession is regulated, tax advisers are legally obliged to practice their profession conscientiously, diligently and in full compliance with all applicable laws. They must respect a binding and enforceable professional code and are subject to a disciplinary sanctions system in the case of infringements. Furthermore, it has to be recalled that in many countries, the profession is acting under the umbrella of public authorities, namely the Ministry of Finances.

At this point in time, it remains to be seen how many tax advisers from regulated organisations exactly are involved in the Pandora Papers. ETAF just launched an inquiry among its members to get a better insight on this issue.

We also oppose the general suspicion around intermediaries introduced by the text and claim the positive role of tax advisers for our societies. The fundamental function of tax advisers as intermediaries between taxpayers and tax administrations cannot be disregarded. Tax advisers act as a support for taxpayers to understand the complexity of tax law and for tax administrations to collect the fair share of taxes.

Preserving professional secrecy

A good example of this general suspicion is that the resolution stresses that “legal professional privilege cannot be used to cover illegal practices”. Professional secrecy is not used to cover tax evasion and avoidance. It is one of the core values of the exercise of the profession.

The EP resolution particularly asks the Commission to issue “guidance on the interpretation and application of the legal privilege principle and to establish a clear line of demarcation between traditional judicial advice and lawyers acting as financial operators”.

ETAF welcomes the request for clarification but points out that regulated tax advisers are already subject to limits in the use of the professional secrecy principle in their respective national regulation.

We reiterate once again that tax evasion is a criminal offence which is contrary to the general interest of the EU and must be fought with determination. In this regard, we hope that the OECD Global Tax Deal, recently endorsed by the G20 Finance Ministers, will help to better fight tax evasion and avoidance and we are looking forward to the proposal for a Directive to tackle the misuse of shell companies announced by the European Commission for the end of the year.