XN000022-1991-05-02 — Page 7

THURSDAY, MAY 2, 1991

DETAILING THE AUDIT PROCEDURE, MR AU-YEUNG SAID ANY CONTENTIOUS ISSUES WOULD BE DISCUSSED TO AVOID POSSIBLE DISPUTES ADDING THAT PROTRACTED DISCUSSIONS ON ADJUSTMENTS WOULD AS FAR AS POSSIBLE BR AVOIDED AS THEY WOULD NOT BE IN ANYONE'S BEST INTERESTS.

"AUDITORS WILL ATTEMPT ΤΟ NEGOTIATE MUTUALLY AGREEABLE SETTLEMENTS OF ISSUES IN DISPUTE WHENEVER POSSIBLE, HE SAID.

H

ON THE SUBJECT OF ACCESS TO AUDIT AND TAX WORKING PAPERS, THE COMMISSIONER SAID SITUATIONS WOULD OCCASIONALLY ARISE WHEN AUDITORS WOULD NEED ACCESS TO WORKING PAPERS TO RECONCILE ACCOUNTS WITH RETURNS AND TO GENERALLY UNDERSTAND THE TAXPAYER'S BUSINESS.

"IT IS MY HOPE THAT AUDITS WILL BE CONDUCTED IN A SPIRIT OF CO- OPERATION. IF IT PREVAILS, THEN I DO NOT FORESEE TAXPAYERS AND THEIR REPRESENTATIVES WISHING TO HOLD BACK WORKING PAPERS.

"CLEARLY, THESE PAPERS WILL ASSIST IN THE RECONCILIATION PROCESS, OR OTHERWISE EXPLAIN THE COMPUTATION OF A TAX LIABILITY, THIS WILL SAVE TIME AND EFFORT FOR ALL CONCERNED, HE SAID.

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TURNING TO LEGAL PROFESSIONAL PRIVILEGE, MR AU-YEUNG POINTED OUT THAT, AS HE UNDERSTOOD THE PRINCIPLE, IT PROTECTED FROM DISCLOSURE CONFIDENTIAL COMMUNICATIONS PASSING BETWEEN A LEGAL ADVISOR AND HIS CLIENT.

**

'MORE SPECIFICALLY,

COMMUNICATIONS ARE ONLY PRIVILEGED WHEN THEIR DOMINANT PURPOSE IS FOR THE CLIENT TO OBTAIN LEGAL ADVICE OR THEY REFER TO A CURRENT OR CONTEMPLATED LEGAL ACTION INVOLVING THE CLIENT.

+T

THE ESSENCE OF LEGAL PRIVILEGE IS THEREFORE FOUNDED

ON THE PROTECTION FROM DISCLOSURE OF LEGAL ADVICE,"

SUBSTANTIVELY EXPLAINED.

HE

TO

NOTING THAT THE LAW PERMITTED, WITHIN BOUNDS, IRD OFFICERS HAVE ACCESS TO TAXPAYERS' DOCUMENTS AND RECORDS ΤΟ ASCERTAIN COMPLIANCE, MR AU-YEUNG SAID HE ACCEPTED THAT IT WAS COMMON PRACTICE FOR TAXPAYERS TO SEEK ADVICE FROM THEIR ACCOUNTANTS IN RESPECT OF TAX MATTERS ON A CONFIDENTIAL BASIS.

"UNDERSTANDABLY ACCOUNTANTS AND TAXPAYERS MAY WISH THAT DOCUMENTS RELATING TO SUCH DISCUSSIONS REMAIN WITHIN THEIR CONFIDENCE.

"ON THE OTHER HAND, THERE IS A NEED TO BALANCE SUCH DESIRES WITH THE EFFICIENT ADMINISTRATION OF THE LAW. IN CONSIDERING THIS ISSUE I HAVE HAD REGARD TO OUR OPERATIONAL REQUIREMENTS AND ΤΟ PRACTICES IN A NUMBER OF OVERSEAS JURISDICTIONS THAT OPERATE SOME FORM OF DISPENSATION FROM DISCLOSURE, HE SAID.

MR AU-YEUNG APPEALED TO TAXPAYERS FOR CO-OPERATION POINTING OUT THAT IT WAS PLANNED THAT TAX AUDITS SHOULD NOT BE PROTRACTED DRAWN OUT AFFAIRS.

/"WE WILL