LONDON (Thomson Reuters Foundation) – Imagine you have the choice between buying your electricity from a company that has a certificate proving that it pays its UK corporation tax in a fair and transparent manner, and a company that does not have that certificate. All else being equal, which would you choose?
Richard Murphy, an accountant and campaigner for tax justice, is now giving consumers that choice with his recently-launched Fair Tax Mark for businesses to show they are good taxpayers.
“It is for companies and organisations that are proud to pay their fair share of tax,” according to the Fair Tax Mark web site.
Citing the UK Tax Gap report figure of 12 billion pounds lost to the public purse each year because of corporate tax avoidance, the new label aims to help consumers boycott tax dodgers and “show them which businesses they can trust and to help them spend their money where it counts.”
Corporate tax avoidance is a hot topic in the UK. Government austerity measures, increased media scrutiny and high profile campaigns by tax activists have put the spotlight on well-known brands that pay little or no tax in the UK. The companies do this through perfectly legal, sophisticated accounting arrangements that allow them to transfer their profits to low-tax jurisdictions outside the UK, thereby minimising their tax liability.
A 2013 survey in the UK by the Institute of Business Ethics (IBE) found that corporate tax avoidance topped the list - cited by 37 percent of nearly 1,000 respondents - as the aspect of company behaviour that needed to be addressed urgently. However, it is difficult for UK consumers to know whether the businesses they support are good taxpayers. Enter the Fair Tax Mark.
Companies that want the Fair Tax Mark have to open up their accounts to experts who will score the company on a set of criteria.
“What we are seeking to assess is, do you have a tax policy, are you actually trying to be tax compliant? Are you being then transparent about the way in which you are operating your affairs? Do you as a result pay a fair amount of tax? So it’s a three-part process really,” Murphy told Thomson Reuters Foundation.
He compared the Fair Tax Mark to the consumer stamp of approval from Fairtrade, which supports shorter supply chains and guarantees farmers in developing countries a premium price to invest in economic, social and environmental projects and fight poverty.
Like the Fair Tax Mark, Fairtrade received much of its initial support in the UK from co-operative businesses, and it also relies on consumers voting with their wallets to promote social change, Murphy said.
He hopes the Fair Tax Mark will inform debate on tax governance in the UK.
“It’s obvious that change is required,” Murphy said. “One of our objectives is to influence that process of change... We don’t think that this is an issue that should be left to the accountants alone.”
A POSITIVE CAMPAIGN
While tax justice campaigners have named and shamed companies such as Amazon and Starbucks that they believe do not pay a fair amount of tax, the Fair Tax Mark is not about criticising companies that avoid taxes but rather highlighting those who pay a fair amount of tax, Murphy said.
He points out that a company may receive the Fair Tax Mark even if it does not pay any corporation tax.
“If they explain why they don’t pay tax, they can get a Fair Tax Mark,” Murphy said. “If companies are willing to disclose that they pay a lower rate of tax because they are using perfectly acceptable allowances and reliefs in ways that are intended, then so what? That’s fine.
“If, however, it is because they have a whole stream of tax haven subsidiaries, we are entitled to say, ‘What are they doing?’”
Murphy sees the continued existence of corporate tax loopholes as part of the unhealthy influence of business on government tax policy.
“Can the government shut those schemes? Let’s be blunt about it, of course it could if it wanted to. So far we have not see governments that are willing to do so and that is true of Labour and Conservatives,” he said.
The Fair Tax Mark, Murphy said, can be a counterbalance to the influence of the business lobby, and will “provide the opportunity for consumers to say ‘we have an opinion on tax policy…’ and then make that opinion held by, literally, the way in which they exercise their free choice.”