June 26, 2014
MAMAS DON'T LET YOUR BABIES GROW UP TO BE TAX ADVISERS
Tax advisers ain’t easy to love and they’re harder to afford.
They tell you what you can’t do, not what you can.
Rollovers, step-ups and those old bumps and grinds,
And each tax return begins a new year.
If you don’t understand them, and they don’t bore ya to death
They’ll probably just fade away.
Mamas, don’t let your babies grow up to be tax advisers.
Don’t let ‘em read statutes and search for loopholes.
Let them be doctors and dentists and such.
Mamas, don’t let your babies grow up to be tax advisers.
They’ll always be nerds and not part of the herds,
Even when they want to be.
[With apologies to everyone out there who loves country music]
As Erik Jensen says, “Those of us in the tax law business know that we are bright, engaging, and
athletic; we combine animal magnetism with erudition.” You may never have heard of the perceptive and insightful Erik Jensen, a longtime tax professor at Case Western Reserve Law School. Despite living in Cleveland and trying to get law students interested in US tax law, Professor Jensen was able to fight through the prevailing orthodoxy that tax lawyers were nerds and wrote the definitive 1991 article establishing convincingly that tax lawyers are in fact intrinsically heroic. “The Heroic Nature of Tax Lawyers” is a wonderful read. Its references to pop culture are somewhat dated and US-centric, but I like to think it is equally applicable in Canada today.
It must be said, however, that Professor Jensen did make a mistake, a completely forgivable mistake given the cutting-edge nature of his research. His mistake was to suggest that accountants were somewhat less than heroic, and that tax lawyers have suffered by being associated in the public imagination with them. For example, he notes that there are no books, movies or television shows about “Frontier” or “Swashbuckling” accountants, but that charge could equally be leveled at tax lawyers. Professor Jensen was, I think, unfair to tax accountants by lumping them together with accountants generally, who are clearly an inferior species – boring, nerdy, with thick glasses and no personality.
Tax lawyers are similarly tainted by being lumped together with lawyers generally. The public view of the legal profession – mouthy, greedy, arrogant, sleazy, conniving (have I missed anything?) – is quite different from that of accountants, but no less unflattering. I will refrain from referring to the extensive body of research as to which species – lawyers or accountants – is less evolved.
Professor Jensen failed to see tax accountants and tax lawyers as being in the same boat, as allies in the struggle for recognition and legitimacy. In the public mind, tax lawyers probably don’t register at all: tax is done by accountants or H&R Block. And if they ever think about tax lawyers, they probably think we do the same things as tax accountants.
The reality is that tax lawyers and tax accountants are nothing like the great unwashed bodies of lawyers and accountants. We should be recognized as a separate and superior species. As a public service, let me provide an honest, objective and completely unbiased evaluation of tax lawyers and tax accountants compared to the mill-of-the-run lawyer or accountant.
First, our basic working materials – the Income Tax Act and the Excise Tax Act – are the two largest statutes, by far. And then there are the provincial tax statutes and all the tax treaties, as well as 4 or 5 volumes of tax cases every year. Nor should we forget the mountains of important administrative materials put out by the CRA – rulings, technical interpretations, interpretation bulletins (folios), etc.
Corporate and securities lawyers, with their undeserved air of superiority and inflated sense of importance, deal with corporate statutes that are a small fraction of the size of the tax acts. They think working hard is doing an all-nighter proofreading documents. Ha! Child’s play!
The accountants have it a bit harder than the corporate/securities lawyers; they have to deal with generally accepted accounting principles, consisting of International Financial Reporting Standards (IFRS) and Accounting Standards for Private Enterprises, as well as some special rules for charities and public enterprises. But if you’ve read those standards or principles, you know they read like a primary school reader compared to the ITA and the ETA. And they aren’t rules like the tax rules; they’re principles or standards with lots of room for judgment as to their application.
Then there is the little matter of the pace of change. The challenge of keeping up with all the developments in Canadian tax law became impossible many years ago. It is difficult enough to stay on top of major changes in your particular field – corporate, personal, international, resource industries, etc. – and the practice of tax is becoming increasingly specialized. We face at least two major tax bills every year, including a major technical bill just before the holidays, in addition to all of the cases, CRA administrative material and the occasional discussion draft from the Department of Finance and the OECD and Auditor General’s reports.
And what do our non-tax colleagues face? As far as I can tell, corporate and securities law haven’t changed in any major way in 40 years. Before the adoption of IFRS in 2011, nobody would have said that Canadian GAAP was constantly changing in response to the evolving needs of the users of financial statements; only accountants would describe accounting standards as dynamic (at least in comparison with tax law).
So the statutes we deal with are much larger and more complex, and they change much more frequently, than those dealt with by other lawyers and accountants.
But there’s more – much more. Tax lawyers have to know some accounting, but all tax advisers have to know a lot of law (in addition to tax law) because our tax system is imposed on our legal system. To determine the tax consequences of any transaction you have to know what are the legal rights and obligations of the parties to the transaction. This could mean provincial, federal or foreign law, and it could involve property law, contract law, corporate law, employment law, trusts and estates etc. So tax advisers really are amazing polymaths – we are the real philosopher kings and queens.
Given the inherent difficulty of tax, you would think that tax advisers and tax officials would be highly regarded by the other members of their larger professions and by the public generally. But no – from my limited experience, tax advisers usually don’t get the respect they deserve even from their own firms. They are often cast in the role of servicing firm clients and undervalued because they don’t have clients of their own. In terms of billable hours, little or no allowance is made for the disproportionate burden borne by tax advisers in order to maintain their human capital.
But at least tax advisers in private practice are paid well. Consider for a moment the plight of the tax lawyers and accountants who work for the CRA or Justice or Finance. Some of you may consider them to be your enemies or adversaries, but they are our professional brothers and sisters. And they have it far worse than any of us in the private sector. They are generally despised by the general public, undervalued and unsupported by their employers, overworked and underpaid. Yet they have the same difficult jobs that we have. Perhaps private-sector tax advisers bear more financial risk than government employees, but in the whole scheme of things what the public tax advisers do is relatively much more important. Taxes are essential for the funding of public goods and services – without which we have no civilization – and our tax system relies on the public officials who make it work.
I must also mention the lowly tax academics. Having taught at Western for many years and been a visiting professor at laws schools in the US, Europe, South Africa and Australia, I have some experience with how tax as a subject and tax professors are regarded by the academic profession generally. I don’t know of any Canadian business schools that treat tax seriously. In Canadian law schools, fringe subjects – Law and “fill-in-the-blank” – get more respect than tax. Many law professors think tax doesn’t belong in a law school curriculum. In their view, tax is just plumbing; it’s what accountants do; it’s practical; it doesn’t have any theoretical content worthy of lofty academic minds. My colleagues and I tried to build a tax program at Western, with an area of concentration in tax in the LL.B. program (since shelved) and a master’s degree in tax. It was a struggle the entire time. Funding was committed and then withdrawn. The master’s program was approved by the University and the provincial government, but then cancelled by the Dean without any consultation just before we were ready to take our first students. I left in frustration soon after.
There are a few specialized masters programs in tax at Canadian universities (Osgoode, Sherbrooke, Waterloo’s well-established MTax program and a new one starting at UBC). But in comparison to the programs available in the United States, Europe and Australia, Canadian universities are far behind. Why? Because tax is undervalued and unappreciated here.
There you have my sad tale of woe on behalf of Canadian tax advisers – we don’t get any respect. What can we do about it? What should we do about it?It’s too late to adopt the ideal solution: create our own tax profession separate from other lawyers and accountants. But one small thing we can and should do is to start honouring our own. Every other profession, industry and group does it. The entertainment industry is especially good at honouring its stars; their awards shows are an extravaganza of self-indulgence. I am not suggesting that we have a Tax Academy Awards every year to celebrate, say, “the best tax adviser in a merger and acquisition,” although the thought of thousands of screaming fans is pretty intoxicating. Annual awards don’t fit well with our profession. But we can and should honour those who have made important contributions to our profession over their careers – with a lifetime achievement award. The award should be given to those in private practice, government service, or academic positions who have demonstrated high standards of professionalism, who have brought credit to our profession and who provide role models for the younger members of our profession.
I have had this idea for many years now and put it forward on a couple of occasions without much success. The idea resurfaced with the passing of Bob Brown earlier this year. On the basis of any standard, Bob was a giant of our profession and we should have recognized his contributions in an appropriate fashion before his death. And there are many others whom we should have acknowledged: David Timbrell, Al Short, David Ward, Doug Sherbaniuk, just to name a few.
The Canadian Tax Foundation is the appropriate organization (actually the only organization) to give such awards. If the parent organizations of the CTF – the Canadian Bar Association and the Chartered Professional Accountants of Canada – were to give them, tax advisers would be lumped in with lawyers and accountants generally and would not be given their due.
I realize that selecting the tax advisers to recognize and honour would be a delicate and difficult task. The process must be rigorous and fair (voting by CTF members, somewhat like induction in the Baseball Hall of Fame? An awards committee consisting of senior practitioners from across the country?) and seen by everyone to be so. But just because it’s difficult doesn’t mean we shouldn’t do it.
I am interested in gauging what the readers of this report think about the idea of a lifetime achievement award for tax advisers. I know that readers are generally reluctant to comment on my reports (which I, of course, construe as your wholehearted endorsement of everything I say) but, without indicating your name, just click below to vote on whether you agree or disagree on what I’ve suggested.
 Erik Jensen, “The Heroic Nature of Tax Lawyers,” (1991) vol. 140 University of Pennsylvania Law Review 367.
 If you Google tax accountants in popular culture, you get a lot of hits about accountants in pop culture but nothing about tax accountants. Some will no doubt disagree with my characterization of accountants. One website dedicated to the rehabilitation of the reputation of accountants mentions something called “extreme accounting.” No, this is not a reference to the questionable practices used by Enron’s accountants. It refers to the remote locations that accountants must visit to ply their trade. An accountant on the international space station – who knew!