Case Study 2 Providing Tax Advice

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Slide 1: 

Providing Tax Advice Presented by Renée Connell

Accountants : 

Accountants Sophia and Maya, both professional accountants, discuss their future in public accounting

Sophia : 

Sophia Sophia would like to focus on the not-for-profit sector because she enjoys it and there is a demand for it

Maya : 

Maya Maya like tax consulting because “that’s where the money is”, she said. She provides advice to wealthy clients.

Slide 5: 

Sophia says, “ it’s not money, it’s about helping people. We’re supposed to be upholding the public interest.”

Slide 6: 

Maya says that she would never advise a client to break the law, but a lot is not covered in the law. She advises a plan when the law doesn’t prohibit something or when it’s ambiguous, but careful to inform the client of the risk that the deduction might be disallowed.

Slide 7: 

Sophia states that the clients are following Maya’s advice because she’s the expert. She’s telling her clients that the advice will save them money and they’re not going to refuse to take her advice.

Slide 8: 

Sophia argues that the tax loopholes that Maya creates are tax dollars that should be going to the government for the good of society.

Slide 9: 

Maya says: - The tax partners will pay tax on the consulting fees and the client will reinvest the remaining amount of money saved

Slide 10: 

Maya says: - Many of the clients think that the government is wasteful anyway. They don’t want the government squandering their money.

Slide 11: 

Sophia responds: “what the government does with the money is irrelevant”. Tax is a redistribution system that is supposed to help everyone in society. Tax loopholes drain money out of that system.

Slide 12: 

Maya says that her first responsibility is to her clients. She is hired to save them money. Sophia says that her first responsibility is to maintain the public interest; her second responsibility is to her clients.

Slide 13: 

Maya states if she doesn’t advise her clients on loopholes another tax specialist may give the advice and steal her clients away from her.

Question 1 : 

Question 1 Is there a basic conflict of interest between upholding the public interest and providing tax advice that reduces the amount of money taxpayers pay to the government? Why or why not?

Question 2 : 

Question 2 How can professional accountants maintain the support of the public while giving tax advice? Is providing tax advice that only benefits the wealthy, who can afford to pay for tax advice, in the public interest? Is this fair? Is providing highly specialized tax advice to naïve clients being paternalistic?

Question 3 : 

Question 3 If a tax specialist spends only one hour devising a tax plan that saves a client $1 million, is it ethically acceptable for the tax specialist to charge that client more than the one hour billing rate?

Question 4 : 

Question 4 Is it ethically correct for a corporation to pay $350,000 to tax consultants so that the corporation can save a million in tax?