Law firm Gilbert + Tobin believes the tax profession can take a leaf out of commissioner Kenneth Hayne’s recommendations in his royal commission final report, especially when it comes to managing conflict of interest and duty to client and remuneration arrangements.
Gilbert + Tobin partner Muhunthan Kanagaratnam believes tax advisers should heed the warning that, as long as they stand to benefit financially from clients acting on the advice that is given, their interests conflict with those of the client.
Some potential conflicts in a tax adviser and client remuneration model might come from success fees, which rely on a contingent fee where tax practitioners are remunerated on the tax outcomes achieved.
“The commission’s warnings on conflicted remuneration should be heeded by tax advisers,” Mr Kanagaratnam said.
“The tension highlighted by the commission is the sacrifice of client service and standards of service for sales and revenue. And despite their appearance, success fees can create a misalignment between adviser and client, as evidenced in the commission’s findings.”
While the report called for further external supervision of financial advisers and mortgage brokers, Mr Kanagaratnam believes tax advisers do not necessarily need additional supervision, but rather more effective supervision by the TPB and professional bodies.
“The commission’s message on managing the conflict between the duty to the client and self-interest is clear: it cannot be done,” Mr Kanagaratnam said.
“As professionals, a change of law is not required — tax advisers are already under an obligation to put the interests of clients above their own self-interest.
“So, if the law and professional rules are clear, the real question becomes whether tax advisers are complying with those obligations. As the commission’s findings demonstrate, eternal vigilance and supervision are required, particularly if the profession wishes to avoid the same level of ire levelled at financial institutions by the public.”
Jotham Lian is the news editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.