Statutory privilege for legal advice extended

Legislation extending statutory privilege to tax advice provided by tax advisors such as chartered accountants will be introduced in November, Revenue Minister Michael Cullen announced today.

“The ‘privilege’ or right of non-disclosure for tax advice provided by non-lawyers will be similar to that applying to tax advice given by lawyers who do not have to disclose that advice to Inland Revenue,” Dr Cullen said.

“Chartered accountants should be able to give candid and independent tax advice to their clients in the same way that lawyers can.

“Clients are likely to be more open with their tax advisors if the advice they receive is confidential, which will ultimately help voluntary compliance with the law.

Communications between advisors and clients will be privileged if they have the dominant purpose of giving or receiving tax advice on tax laws. Clients will be able to waive the privilege if they wish – for example, to defend a tax position they have taken on advice.

“The privilege for non-lawyers will be subject to restrictions. Factual information included in advice given to clients will have to be disclosed to Inland Revenue in the form of a statutory declaration. There will also be exclusions for information that supports financial statements and tax returns, for non-tax advice such as valuation and investment advice, and for matters relating to debt recovery and fraud.

“As a result of extensive consultation with professional bodies, the government is satisfied that the proposed change strikes the right balance between consistency of treatment for tax advice and ensuring that Inland Revenue has access to sufficient information to do its job, Dr Cullen said.

The change will be included in the taxation bill to be introduced in November and is expected to apply from enactment.

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