Privilege, fair play - and tax advice

Wednesday 6 October 2004

Plans to extend legal privilege to accountants are being welcomed by the profession. How will taxpayers benefit ? Kristina Greene reports.

By The Landlord

The client, a middle-aged Christchurch man, knew he was in trouble. He had manipulated his tax record by mismatching income and expenses. Now the Inland Revenue Department was on his tracks and he faced an audit.

He was in fact doubly on his guard, as no legal privilege now protects information shared with accountants from court – or IRD – scrutiny. And his accountant was placed in an inordinately complicated situation in which the new client needed swift help in specific matters but was afraid of explaining where trouble lay.

"It was clear there had been goings-on with previous accountants. But the client was extremely fearful because any information he passed on to us might be disclosed to investigators and it was very hard to drive the audit," says his accountant.

In the end, his client escaped a jail term – by the skin of his teeth.

"I do believe that a better outcome could have been effected if my client had communicated freely. Better still, it might never have got into dodgy territory in the first place."

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