Time ago I had a business in Spain. Cash coming in is always great. No one can deny that. However, despite being Spanish, I’m not a tax resident because I’m living abroad. However, in the contract we signed, it was suggested I was to be responsible to pay a certain tax. Due to my lack of knowledge in tax area, I accepted.

After signing the contract and receiving the funds, I was ready to pay that tax. Even a relative went on my behalf to obtain the payment letter. However, after reviewing the law I found out that I wasn’t actually responsible for it.

In that case I started the corresponding legal procedure. I collected the contract, the payment letter, and other relevant information, and sent a question to the tax authorities regarding that tax. I received a phone call days later confirming I didn’t have to pay for it, so I didn’t.

A month later, I received a complaint from the purchaser complaining I didn’t pay the tax and they had received the payment letter instead. After exchanging a few words I explained the whole situation and pushed it back. Other parties involved, however, pointed out I didn’t fulfill my obligations as a taxpayer and another person had to pay for a tax I was supposed to pay.

Months later I explained the situation to another person in that business who has nothing to do with my case. Not surprisingly, she told me that I was being unethical, immoral, and that everyone acted accordingly and correctly. Even I was told I should reach out to my buyer and pay the tax to end the business in good terms because I was acting unethically on the grounds that buyers already pay a lot of taxes for that type of business. I claimed that I was following the law and even I had an official answer from the tax authorities. The other side claimed that in case they would escalate it a judge would take down my claim and I would be forced to pay the tax. Despite my doubts, I said that the other side is welcome to initiate the legal procedures and, if in case it is decided by the competent authorities that it was my duty to do so, I would.

There was an exchange of opinion in which I was told that that law was unfair and unethical. I agree. That tax was high. But was I acting unethically? In my opinion, I wasn’t.

Ethics is one of those topics that can be seen under many different angles. Even though I can agree that that tax could be unfair, also I was following the law. Also it could be argued that a business show know and follow regulations and it that case, when the other side was not aware of the law I pointed out that also it is unethical to claim you don’t know a certain law or that “it has always been done like this” or “we do it like this because that law is unethical” or any other reason why.

Some people use the word unethical when they want to protect their image, not because they truly think that what you are doing is. However, not advising properly a client, manipulating accounts to pay less tax because you consider that taxes are already high, it is unethical because you are trying to make profits by doing something illegal.

This can be resolved by simply asking questions such as “Let’s assume I agree to pay that tax and when I want to deduct the cost for another tax that I need to calculate. If the tax authorities decide to initiate a tax inspection and they ask me why I’m deducting a cost that by law I don’t have to pay, and decide to recalculate my taxes and charge me penalties and interest, are you guys going to stand by my side and say we did it like this because this specific law is unethical, according to you?” When I raised the question, of course, nobody answered “they would stand by my side”.

When the buyer was looking for an explanation, no one was able to deliver a proper answer. They only they got was “you have this tax because he didn’t and now it has to be you, when it was his responsibility”. However, I spent time to explain why it was not my duty to do so, and even I encouraged the buyer to follow the legal steps I did to submit their claim. I didn’t have to do that, but it’s my duty to be honest. As I said to him, also it wasn’t my responsibility to spend time answering these questions when the intermediaries, who should be aware of all the regulations, didn’t. To sum up, once they got paid, they forgot about the topic.

Where are the ethics now?

In more or less the same period, I had to pay another tax whose tax base was higher than I had expected. When clarifying it with my tax advisor, I was explained why. I found it unfair, and, to be honest, I think I shouldn’t have to pay such a big tax. Unfortunately, this time regulations were not in my favour and I submitted and paid a tax that in my opinion was too much and unfair. However, I had to follow the law.

We accountants have to behave in ethical ways, but we also have a duty to follow regulations, like anybody else. Ethics are not usually a clear topic and many conflicts can arise which in some situations can be really difficult to follow and resolve. In any case, when there is a conflict, laws and regulations should always be followed first.

Did I do it correctly? Maybe time will tell and I learn a lesson, but in the meantime, I will try to raise questions when something concerns me. There is nothing wrong in protecting our wealth. In fact should be our primary concern and there is nothing wrong to do that.