Who are tax professionals? These are persons who provide tax services to taxpayers, this could be representation of the taxpayers during audit or in appeals processes, court hearing, they also help in filing of tax returns or in the certification of financial statements and tax returns.
These can be lawyers or accountants; in fact they support Governments in ensuring that taxpayers meet their obligations. Both developing and developed economies need such services. In developing economies, people still find problems in record keeping, interpretation of tax provisions remains a big problem, and application for rulings from the tax administration tend to be a norm.
The other major problem is to understand how tax laws have succeeded one another, whether the law that one has before himself is still in force or whether it has been repealed is often a duty that is left to the tax professionals. In some jurisdictions tax professionals support tax administration in formulating tax laws and rules (see Vitctor Thuronyi, (Ed.), Tax Law design and drafting, IMF 1997 p. 135).
The other role which is not often mentioned is that they help the business community from unfair decisions taken by the tax administrations. They are able to do this because despite their expertise knowledge they may have in matters of tax, they participate in debates that give rise to the drafting of tax laws and regulations, indeed they are able to know which mischief was being addressed by a given tax provision.
In developing and transition economies, taxpayers have problems like lack of knowledge in book keeping, interpretation of tax provisions and lack of knowledge on the general procedures on tax, this, therefore, calls for support from the tax professionals.
On the other hand, in developed world, Issues like tax planning, e-commerce, cross-border taxation, managing harsh anti-avoidance provisions, transfer pricing, the intricacies of Value Added Tax, etc make the use of tax professionals a necessity. This is not to suggest that the above problems are specific to a particular economy. In modern times, many of the above problems cut across all the economies.
There are two recognized categories of tax professionals in Rwanda:
- Tax advisors. Under Rwandan tax law, the charging provisions are article 58 of law No 25/2005 of 04/12/2005, on tax procedure, as modified to date. This provision relates to taxpayers’ right of representation by persons qualified in tax or law.
Their duties are the following:
i) Representing taxpayers during objection/appeals or during audit process;
ii) Filing a tax return,
iii)Representation in courts of law,
iv)Daily management of taxpayers’ accounts.
The second category is that of auditors, who certify financial statements and tax returns. The charging provision is article 12 of law No. 16/2005 of 18/08/2005, on Direct Taxes on Income, as modified to date. The Commissioner General Rules No. 007/2009 of 07/12/2009, implements the above law. These rules spell out conditions for eligibility for one to license into this field.
Briefly, the Commissioner General rules provide that businesses which have a turnover of 400 million Rwandan francs (in a given tax period) are required to have their financial statements and tax returns certified by qualified professionals.
It further states that such professionals have to be members of the Institute of Certified Public Accountants of Rwanda and that they have to present a bank or insurance guarantee of 100 million Rwanda Francs. They are also required not to have an outstanding debt with treasury. Applicants should not have been involved in acts of tax evasion in any way.
Where additional tax is established as a result of negligence of the tax professional (auditor), then the auditor becomes liable for 100% payment of the additional tax which has been established. However, if such an error results from documents that were not disclosed to the auditor, then the auditor is relieved of the responsibility to pay the additional taxes.
In drafting regulations governing tax professionals, there are vital design considerations which should not be departed from. We will not mention all of them, but we will have a look at a couple of them:
i) Extent of control over tax professionals,
ii) Maintaining quality standards
iii)Extent of control over such professionals;
iv)Responsibility of the professional for his acts or omissions,
v) Privileged communications made between a professional and the client;
vi)Regulation of international consultants;
vii)The chargeable fees.
In order to ensure that quality standards are set and maintained, the Government sets qualifications for persons who need to practice, usually, a university degree in a relevant field is a requirement.
In certain other jurisdictions, applicants have to sit an exam, when they do not have the degree required, but they are supposed to have worked in area field, such as in tax administration. UK can be cited as an example.
The author is a managing partner-consultant at Millenium Law Chambers.