Rethinking Privilege for Tax Professionals: A Tax Policy Perspective

Abstract

In Canada, information exchanged between an accountant and a client, while confidential under professional codes of conduct, is not privileged unless it falls within limited common law exceptions. Some countries have legislated to extend limited privilege to accountants, but Canada has not yet done so. This paper uses tax policy principles to critically evaluate the differential treatment of lawyer-client and accountant-client relationships under the rules of privilege in Canada. From a fairness perspective, the distinct treatment of taxpayer information based on the tax advisor consulted is inequitable. Differences in access to privilege create distortions in the tax advice market and increase complexity. The paper also identifies justifications for not extending privilege to accountants. Tax lawyers owe special duties to the administration of justice, but accountants do not. Taxpayer rights must be weighed against a state’s need to prevent tax avoidance and evasion. A modern balanced approach may lie in the legislated recognition of limited privilege for accountants, while allowing for clear exceptions to continue to facilitate tax administration.

Keywords: Tax law, Canada, privilege, evidence, evidentiary privileges, accountants, lawyers, Canada, tax policy, tax administration