To license or not to license? The way to determine professional standards
A public dispute has arisen over the licensing of tax advisors in Israel. The topic is of interest and touches on the important larger questions of freedom of occupation versus advancement of professional standards.
All tax advisors are required to pass a demanding set of exams. In addition, there has been a requirement for attendance at an authorized college or passing the bagrut (matriculation) exams.
Recently, the Tax Advisors Council, which is the official body setting professional standards, made a decision to cancel the requirement for bagrut.
The objective was to make entrance to the profession easier for haredim, particularly haredi women, most of whom do not take the exams.
This decision prompted a lawsuit from the Tax Advisor’s Association, the recognized professional association. They claimed that the decision was marred by severe procedural shortcomings, in effect shutting out the association’s representatives.
On the other side of the legal fence, United Torah Judaism MK Moshe Gafni proposed legislation that would formally exempt graduates of specific haredi institutions from the bagrut requirement.
Behind this legal maneuvering is a substantive question relating to the professional standards of tax advisors. The Association claims that relaxing the bagrut requirement will lower the level of practitioners and the quality of tax reports received by the authorities.
Gafni claims that leaving it where it is creates a barrier to entry to the profession for members of his constituency who are perfectly qualified for the job.
How should we resolve this question? To what extent should the practitioners of a profession be allowed to determine the conditions of entrance to the profession? At one extreme we find the position of economist Milton Friedman, who viewed any kind of professional licensing as mere monopoly power. He felt that any person should have the right to practice medicine, law or any other profession. If the consumer wants someone with professional credentials, he can choose to give his business only to a practitioner who meets certain standards, but that should be his choice. Friedman anticipated that private organizations would arise to give certificates to qualified practitioners in return for a licensing fee.
One response to Friedman is to say that the consumer did indeed decide to trust a reputable licensing body; they called it the government. Just as the average consumer has no real way of telling if one surgeon is better qualified than another, he has no real way of telling if one private licensing body is more reputable than another. The free-market solution is to entrust this decision to a government regulation, thus ensuring public oversight.
Governments can also be actors in the free market, and they have efficiency advantages in many areas over private bodies.
Naturally, if the government wants to know what qualifications a doctor, accountant or tax advisor should have, they will turn to experts in the field.
But the fundamental legitimacy of licensing can’t make the conflict of interest disappear.
There will still be a tendency to make very strict conditions of entry in order to limit competition, against the public interest.
In our case, it may be true that requiring bagrut exams will lead to higher standards in the profession. But it will also exclude many qualified individuals.
Requiring bagrut exams for carpenters would probably also raise the average level, but it would also drive many excellent workmen from the field and make it hard to find a good carpenter.
This decision must ultimately be left to the legislature, which is charged with balancing competing public interests.
It seems to me that requiring a bagrut exam is an artificial barrier to entry that excludes many qualified candidates, including the Beit Ya’acov graduates Gafni is trying to help.
Allowing them to provide tax advice will help them and their clients.
So with due respect for the legitimate interest of tax advisors in maintaining adequate professional standards, I identify with the effort to remove excessive and artificial obstacles to professional practice.
Asher Meir is research director at the Business Ethics Center of Jerusalem, an independent institute in the Jerusalem College of Technology (Machon Lev).
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