The role of accountants in reducing the tax gap : an analysis

Abstract

Purpose: The principal aim of this study is to analyse the role of accountants in helping to curtail the tax gap. It seeks to explore the introduced tax-oriented government policies and how these have affected the responsibilities of accountants. Moreover, it examines how government authorities view the role of accountants in helping to curtail the tax gap as well as the main challenges faced by accountants in their contribution to its reduction. Design: This study’s objectives were attained by holding semi-structured interviews with various accountants from local accountancy firms and several government officials. Findings: This research has established that tax-oriented policies implemented by the Maltese government to reduce the tax gap have increased both the workload and the responsibilities of accountants. The government expects accountants to help in the reduction of tax gap as they are an essential intermediary between the government and the taxpayers. However, the government needs to help accountants to toe the line by improving both the communication and collaborative channels. Moreover, measures need to be taken to minimise the likelihood of accountants contributing to the tax gap. These include the elimination of loopholes in the laws, the carrying out of due diligence procedures, stricter regulations and the curtailment of aggressive tax planning. Notwithstanding this, the study provides instances where accountants should not bear responsibility for tax evasion. These arise due to asymmetric information between the taxpayers, accountants and the government. Conclusions: Although accountants play a significant part in assisting to reduce the tax gap, they are confronted by challenges in the course of their work. Such challenges arise when clients disregard the accountant’s advice, withhold essential information or else engage in suspicious activities. In such cases they should act in a responsible and ethical manner. Likewise, they should refrain from encouraging their clients to pay less taxes by resorting to loopholes. Thus, accountants should allure taxpayers to pay their proper tax dues and should seek to reduce information asymmetries as far as possible. Value: This dissertation aims to contribute to the acknowledgment of the essential role of accountants in the curtailment of the tax gap and in contributing to the effectiveness of the tax system. It also focuses on the need for accountants to demonstrate professional scepticisim in their work so as to contribute to a culture of ethical behaviour in the Maltese tax system.