May 2017

The Ethical dilemma of offshore providers supporting non registered tax agents

By: Odyssey Outsourcing
Tags: ethics, Overseas outsourcing, tax outsourcing

Had an interesting phone call today.

Odyssey was called by an Australian accountant who was wholesaling to other Australian accountants.  The conversation progressed well and they were impressed by our business model, pricing and reputation for quality. They particularly liked our ad hoc approach to receiving jobs.

Afterwards as we moved towards preparing a services agreement for them we ran into a small problem. The company they were using wasn’t a registered Australian tax agent.

So we contacted them to seek clarification. The email went something like: “We’re having problems finding your tax agent registration, and just want to check you are a registered tax agent. Appreciate your clarification/confirmation of the correct details”.

The response came back as “Neither my company nor myself are registered tax agents. We just wholesale, and we either use other tax agents to lodge the returns unless the accountants want to lodge it themselves”.

This left us in quite a predicament. As we then responded: “We can’t contract or provide services to you or your firm”, with an explanation summarising the Tax Practitioner Board Information Sheet for Payroll Service Providers, “An individual, partnership or company must be registered as a tax agent or BAS agent to provide a ‘tax agent service’ or ‘BAS service’ for a fee or other reward. A tax agent service includes preparing or lodging a return, notice, statement, application or other document about a taxpayer’s liabilities, obligations or entitlements under a taxation law.”

We thought it quite clear that we weren’t in a position to provide services to someone who would then charge for tax preparation services when they weren’t an Australian registered tax agent.

In effect, Odyssey would be assisting the company to break the law through providing tax preparation services to a non registered tax agent company as they on-sell the tax preparation services.

Now perhaps we’re in an ethical wilderness here, and certainly the response from the prospect seemed to indicate it wasn’t an issue: “I am bit confused as to why your contract has to be with a tax agent? The clients engagement is with (the non registered tax agent entity) and the liability rests with (the non registered tax agent entity) and our clients (other tax agents)… However if that’s how you have setup your business, then unfortunately it would appear we cannot proceed.”

So yes, that’s how we setup our business, and that’s how we roll.

So we walked away from the prospect, and they’ve indicated they are moving on to look at other outsourcing jurisdictions, and will likely work with a firm that probably doesn’t have a similar ethical constraint, or has a business model where they aren’t charging for tax preparation services but merely providing resources on a “per seat” basis  (and what you do with those resources is really none of our business!).

So how would you have addressed this ethical dilemma?