Such information should have been brought into existence for the main reason of obtaining or giving a legal advice or to be used for current or future litigation.
Currently, there is no separate provision in tax law restricting the tax administration from inspecting a taxpayer’s files containing legal advice. What exists is the professional secrecy of lawyers for information which the lawyer has shared with his client, through discussion or communication.
(See article 65 of the Law N°. 03/97, establishing the Rwandan Bar Association, as modified to date. What is inferred in this provision is that if a lawyer can not reveal client’s information to a third party, then no third party may take for whatever use such information, unless this is done within the limits of law. Therefore, a client has right to claim privileged communication even when the tax legislation does not explicitly stipulate it.
Referring to Australian situation, the Commissioner has powers under the Income Tax Assessment Act 1933, to obtain information from taxpayers, which would assist the Commissioner to determine the assessable income. Under the Access and Information gathering manual, there are provisions that prohibit searching certain information.
In such a case, any taxpayer/business who thinks that he has privileged information under his/her possession, he has to indicate it, by marking it with such words as “privileged information-tax advice”. When such words appear on a document, then the tax officer is required to stop on seeing it.
The principal reason for such protection (privilege) is to strengthen the confidence between a client and his counsel. This explains why clients usually disclose in full, information to their lawyers. In jurisdictions where such rules apply, the tax administration is required to give the taxpayer the opportunity to invoke the right of “privileged information”. They will usually ask the taxpayer whether he has “privileged information” at the time of visit.
It is important to mention that not all communications between a client and his lawyer is privileged. Victor Thuronyi as well as some case laws, indicate that some information provided by a taxpayer to his lawyer may for example only be necessary for a lawyer to prepare a tax return, in which case this kind of information may not be said to have a “privileged” status.
4. Should a tax professional report to a tax administration a taxpayer who commits the offence to maintain double-invoicing? Exparts in tax law law, who have been sited in this article, suggest that since a consultant/professional owes primary allegiance to his client, then he should not report him/her, instead he is expected to advise the taxpayer to correct the error identified, but should the taxpayer not heed, then the lawyer/consultant would just abandon the taxpayer and inform the tax administration that he is no longer working with such a taxpayer in the capacity of a lawyer/consultant.
The other question that comes to one’s mind is whether the tax professional should reveal to the administration why has ceased working with that taxpayer? I think it would be appropriate that some kind of information is written down; so that the taxpayer does not claim that the fraudulent act was committed by his former lawyer or consultant.
If the consultant reports the taxpayer to the tax administration, this is likely to impede disclosure of full and frank information to the lawyer/consultant and would lead to a decline of trust that exists between these parties that need each other.
5. Regarding rule of admission of intentional firms to practice in another country. What is the practice here in Rwanda? First, international firms have to be authorized by the Institute of Certified Public Accounts of Rwanda. In addition, since members of the Institute in Rwanda are also required to apply to the Commissioner General to act as auditors, an international firm has also to apply to the Commissioner General in order to be granted that permission.
The writer thinks that it is necessary that the Institute communicates to the other Institute in the home country of the said international professional, just in event that a liability arises in the course of his practice in a foreign country, which liability may also affect his practice back at home.
6. The issue of fees. It is hard to determine fees payable because not all businesses have equal workloads. Germany so far has fees structure, but the whole idea is that there is need to see how much time a given piece of work has taken to accomplish, which leads us to what is usually known as “man-hours” worked, and determine the cost per man-hour. The other thing is that a man-hour of a junior may not cost as man-hour of a senior person.
The author is a managing partner-consultant at Millenium Law Chambers.