Tax advice to be legally privileged

By BRIAN FALLOW

Tax advice from chartered accountants is to be legally privileged, just like that from lawyers, Finance Minister Michael Cullen says.

"Clients are likely to be more open with their tax advisers if the advice they receive is confidential, which will ultimately help voluntary compliance with the law," he said yesterday.

Accountants welcomed the levelling of the playing field.

Deloittes tax partner Thomas Pippos said some senior tax accountants believed lawyers had used privilege as a marketing tool, advising their clients not to seek advice from accounting firms because the advice was not privileged.

"I haven't personally seen that occurring. In practice the [Inland] Revenue respects the confidentiality that exists between the adviser and client," Pippos said.

"But, theoretically, they can - and if the amounts are substantial and the dispute is intense they will - exploit the full legal rights they have."

Privilege will not extend to the facts of a transaction, only to the professional advice given and only to advice on tax.

Institute of Chartered Accountants tax director Annabel Young said the change would encourage candour. "What Inland Revenue get out of this is access to the facts of a transaction with probably less difficulty than they have now."

The change will be included in the next taxation bill, due to be introduced to Parliament in November.