The recent case involving Crocodile Dundee – Paul Hogan raises the issue of privilege in relation to tax advice given by accountants. It is well established in common law that certain communication between a lawyer and a client are privileged. But the same safeguard is not afforded to communication between clients and their accountants.

It has been widely reported that the Tax Office used advice provided by Hogan’s accountant which said that the offshore structures used by him were illegal (see Tax lawyers gave Hogan ‘all clear’ for offshore fund

The Australian Financial Review reported in its Weekend issue Page 5 (28-29 August 2010) that his lawyers will argue that certain documents should be kept confidential between taxpayers and their advisers in all but ‘exceptional circumstances’. (Accountants will watch case closely).

Doesn’t all this raise the question whether it is time that privilege be statutorily provided to certain communication between taxpayers and their accountants?

The Australian Law Reform Commission (‘ALRC’) has proposed the adoption of a regime similar to the one now in New Zealand. The New Zealand statutory regime extends the traditional solicitor-client privilege to specific ‘tax advice documents’ provided by recognised ‘tax advisors’.

A document will be a tax advice document if any of the following criteria are satisfied:

• it is created for the main purpose of instructing a tax adviser to act for a person by giving advice to the person about the operation and effect of tax laws
• it is created by a tax advisor or, if the tax advisor is in public practice, an employee of the tax advisor’s firm, for the main purpose of recording research and analysis that is performed for the main purpose of enabling the tax advisor to give advice about the operation and effect of tax laws, or
• it is created by a tax advisor or, if the tax advisor is in public practice, an employee of the tax advisor’s firm, for the main purpose of giving tax advice or recording advice given about the operation and effect of tax laws.

Presently, members of the Institute of chartered Accountants of New Zealand are recognised as ‘tax advisers’ for this purpose.

Tags: Accountants, Hogan, privilege

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This entry was posted on Tuesday, August 31st, 2010 at 1:22 pm and is filed under Legal privilege, Offshore. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.