top of page
  • Writer's pictureMatthew Wise

Tax and Ethics

Tax practitioners help their employers and clients to understand and meet their tax compliance obligations, and to know what tax planning opportunities may be available to them. These opportunities can range from illegal tax evasion schemes to those that are merely taking advantage of tax incentives in the manner that the government intended. In between those two extremes is a grey area. The General Anti-Avoidance Rule (GAAR) was introduced in 1988 to address this grey area by distinguishing between legitimate tax planning and abusive tax avoidance.

Understanding where the line is between legitimate tax planning and abusive tax avoidance is critical, as the latter can be costly due to third-party civil penalties for preparers, gross negligence penalties for clients and potential reputational damage for both. Tax planning and tax compliance activities can also raise unique ethical issues for CPAs.

All CPAs are required to adhere to the CPA Code of Conduct (“Code”), called the Rules of Professional Conduct in some provinces. To understand how the Code applies to specific situations encountered by tax practitioners, it is helpful to consider each of its fundamental principles:

  • professional behaviour

  • integrity and due care

  • objectivity

  • professional competence

  • confidentiality

Professional behaviour

CPAs must conduct themselves, at all times, in a manner that will maintain the good reputation of the profession and protect the public interest. In particular, CPAs must consider whether any tax planning opportunities with which they may be associated might bring them, and the profession, into disrepute.

Integrity and due care

CPAs must act honestly in all dealings with their clients, tax authorities and other parties, and do nothing knowingly or carelessly that might mislead either by commission or omission. They must also ensure that their staff have appropriate training and supervision.

The Institute of Chartered Accountants of England and Wales issued guidance in the Professional Conduct in Relation to Taxation report ( that “[a] member who has reason to believe that the proposed arrangements are, or may be, tax evasion must strongly advise clients not to enter in to them. If a client chooses to ignore that advice, it is difficult to envisage situations where it would be appropriate for a member to continue to act other than to rectify the client’s affairs.”

In addition, practitioners who believe that they are being asked to use a statement that is clearly false or highly suspicious when preparing tax returns or other filings should consider withdrawing from the engagement, particularly if they want to ensure that they won’t be subject to third-party civil penalties. These penalties were introduced into income and excise tax legislation to apply to those who counsel others to file their returns based on false or misleading information, or to those who turn a blind eye to false information provided by their clients for tax purposes. Two penalties are possible: one for tax promoters and one for tax preparers. These penalties are not intended to apply when there are honest mistakes or when there are differences of opinion where there is bona fide uncertainty.


Relationships which unduly influence or bias the professional judgment of the member must be avoided. If practitioners receive a commission or other financial incentive from a third party relating to a matter upon which they are advising the client, they must ensure that the remuneration does not compromise their objectivity, and they must disclose the compensation arrangement to the client.

Professional competence

CPAs have a duty to carry out their work with requisite skill and care. At the 2019 The One Conference, there was a joint presentation by CPA Canada and the administrator of the professions professional liability insurance programs, where they identified that almost 60% of the number of liability insurance claims from 1999 to 2019 were a result of taxation services, accounting for almost 40% of the claims paid. The most common reason for those claims was a lack of expertise – that is, errors due to practitioners advising on technical tax matters when they did not have adequate experience or knowledge. Other common reasons included a lack of attention to detail, such as missing filing deadlines and lacking relevant documentation. CPAs should consider obtaining second opinions on significant matters and seeking assistance from suitably qualified specialists when appropriate. For more information on how practitioners can help reduce risk in their tax-related practice, please refer to CPA Canada’s comprehensive Tax Risk Management Guide:


CPAs can only disclose confidential client information without the client's consent when there is an express legal or professional right or duty to disclose, such as complying with anti-money laundering legislation or practice inspection by their CPA body. When CPAs withdraw from engagements, they have a duty to respond promptly to communication from a successor member or firm as to whether there are any circumstances that might influence their decision to accept the engagement. In these cases, practitioners should state that there are such circumstances but that they cannot disclose them without the client’s permission. Further, CPAs cannot inform the Canada Revenue Agency due to the confidentiality requirement, but there may be a legal duty to report schemes that involve suspicious transactions or large cash transactions under anti-money lending legislation (visit for further details). When confidentiality is in doubt, the CPA should consider obtaining legal advice.

CPAs who accept payment to prepare more than 10 tax returns in a calendar year are required to file personal and corporate tax returns electronically, with some limited exceptions. They must file these returns as an agent for the taxpayer, and the client must review and approve the tax filings before they are submitted. It is critical that the practitioner ensure that authorization forms are completed and that there are appropriate controls over the filer's access credentials. While there is no requirement to verify the information provided by the client, CPAs should not be associated with the presentation of facts that they know (or should have known) to be false or misleading, or to assert tax positions in the filing that they consider to have no sustainable basis.

As with any ethical matter, CPAs can consult with the Member Advisory Services at their provincial body for guidance on application of the Code.


This article is reprinted from the newsletter BUSINESS MATTERS with the permission of CPA Canada. BUSINESS MATTERS is a bimonthly newsletter prepared by the CPA Canada for the clients of its members.


BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.

13 views0 comments

Recent Posts

See All


bottom of page