Tax Planning, Ethics and Compliance
Core concepts
Tax planning seeks to arrange affairs lawfully to minimise tax, distinguishing tax avoidance (legal but aggressive, often countered by anti-avoidance rules) from tax evasion (illegal). Candidates must know general anti-avoidance rules (GAAR), disclosure regimes, and professional ethics (integrity, objectivity, confidentiality, competence).
Compliance concepts: filing deadlines, penalties and interest, record-keeping, and voluntary disclosure options. Ethical practice requires advising within the law, flagging risk, and refusing to assist evasion.
Traps to watch
- Avoidance vs evasion: evasion involves concealment or false statements and is a criminal matter.
- GAAR can recharacterise transactions lacking commercial substance.
- Disclosure obligations may apply to aggressive schemes; ignoring them creates penalties.
- Confidentiality is not absolute-legal or regulatory disclosure may override it.
Rule of thumb
Test any plan against three questions: Is it legal? Does it have commercial substance? Is it disclosed where required?
Worked example: A structure shifts profit to a low-tax affiliate with no staff or activity. Lacking substance, it risks GAAR challenge and disclosure penalties; advise the client of the risk rather than certify compliance.