Financial planners that are registered to provide taxation advice are caught by revisions to the legislated Code of Professional Conduct that once again acts reactively by adding a redundant layer of protection.
Revisions to the Code are open for public comment from now until 21 January 2024 and contain provisions that are clearly responses to themes that have emerged from the PwC case study that involved a breach of confidentiality by an individual who was a tax agent at the time.
These changes to the Code are proposed in a determination – a regulation the relevant minister can issue – that is now the way the Code will be amended so parliament doesn’t have to relitigate the Tax Agent Services Act whenever someone decides an amendment is required.
It is an open question as to whether these amendments that apparently address the circumstances of PwC are really necessary, and here’s why.
Let’s first look at the specific references to the existing Code relevant to professional behaviour and confidentiality.
The Code specifies that a registered tax agent must act honestly and with integrity, and comply with all taxation laws in the conduct of their personal affairs.
Acting with honesty and integrity is the first point of the Code and that captures everything, and the confidentiality section relates to not disclosing information related to a client’s affairs unless required to do so.
There is also a section that deals with the need to have adequate arrangements in place in place to manage conflicts of interest that may arise in relation to the activities you undertake in the capacity of a registered agent.
Former PwC partner Peter Collins was sidelined by the Tax Practitioners Board because they found he breached the sections related to honesty and integrity, and management of conflicts of interest.
The TPB was clearly able to ping Collins for breaching a confidentiality agreement on the first clause which related to the management of conflicts. Collins was hit with a termination of registration and prohibited from reapplying.
What is curious about the draft amendments is that some folks in Canberra seem to think you need something that looks like an idiot’s guide to confidentiality to make it clear what is meant by confidentiality in circumstances where government consultation is happening.
The terms peppered through the draft determination are also rather weird given the context of the PwC matter.
It involved a person providing insight into the operation of tax law to a government consultation process.
This has nothing in its own right to do with the holder of a tax agent registration even though a tax agent – financial planner or otherwise – could be involved if invited by Treasury or the Board of Taxation to participate.
An individual would be asked because of their expertise or might be nominated by their firm as a subject matter expert.
The draft determination makes the error of hardwiring the notion of somebody consulting or engaging with government in their capacity as a tax or BAS agent when people would be engaged in government consultation because of their expertise on a topic.
A committee of professional bodies that includes representatives of financial planners that are recognised by the TPB meets with the board to talk about things people do in their capacity as tax or Business Activity Statement agents.
There is a greater flaw in this determination and the logic it appears to apply, and that is that people need to be registered in order to legally get fees for the provision of tax or BAS agent or tax agent services.
Nobody has to be a registered professional to consult in an area of subject matter expertise on a government panel and the seeking of views is typically pro bono.
What actually is the point of a determination dealing with confidentiality the way it does when the PwC matter that has dominated the headlines were issues related to a breach of a confidentiality agreement for a consultation that was done for no fees?
Sometimes it is better to regulate by principle – prescription can turn an enforcement action into a lawyers’ picnic.
The requirement to behave with honesty and integrity should be sufficient to deal with the confidentiality conundrum encountered in the PwC matter.
