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Abusive Tax Avoidance and Institutional Corruption: The Responsibilities of Tax Professionals

54 Pages Posted: 18 Feb 2015 Last revised: 25 Feb 2015

Gillian Brock

University of Auckland; Harvard University - Edmond J. Safra Center for Ethics

Hamish Russell

University of Toronto

Date Written: February 17, 2015

Abstract

Professionals and professional firms provide a range of taxation-related services, from advising clients on their tax obligations to designing and implementing tax-reduction strategies. Provided that tax professionals respect the letter of the law, are all such tax services morally permissible? We answer this question in the negative by distinguishing between institutional integrity and institutional corruption in fiscal arrangements; tax services that promote a situation of fiscal institutional corruption are impermissible, given that they severely inhibit the ability of taxation institutions to collect revenue efficiently and equitably. The professional facilitation of abusive tax avoidance — explicit tax reduction that is contrary to the spirit or intent of the law — is a particularly prominent aspect of fiscal institutional corruption. We illustrate the role of professionals in designing, promoting and implementing abusive tax avoidance strategies through several case studies, including the Wyly offshore network and the KPMG tax shelter scandal. In addition, we claim that tax professionals have specific responsibilities to help remedy institutional corruption associated with abusive tax avoidance. To argue this thesis, we present general principles for assigning remedial responsibilities to particular agents. We then apply those principles to determine what three major groups of tax professionals — accountants, lawyers, and financial experts — ought to do about abusive tax avoidance.

Keywords: Institutional corruption, institutional integrity, tax abuse, tax professionals and responsibilities, remedial responsibilities, abusive tax avoidance, fiscal corruption

Suggested Citation

Brock, Gillian and Russell, Hamish, Abusive Tax Avoidance and Institutional Corruption: The Responsibilities of Tax Professionals (February 17, 2015). Edmond J. Safra Working Paper No. 56. Available at SSRN: https://ssrn.com/abstract=2566281 or http://dx.doi.org/10.2139/ssrn.2566281

Gillian Brock (Contact Author)

University of Auckland ( email )

Harvard University - Edmond J. Safra Center for Ethics ( email )

124 Mount Auburn Street
Suite 520N
Cambridge, MA 02138
United States

Hamish Russell

University of Toronto ( email )

Department of Philosophy
Toronto, Ontario M5R 2M8
Canada

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