The original speech was given by Paul Monaghan, one of the Directors of the Fair Tax Mark, at the Ethical Consumer Conference, on September 30th in London. These are my notes from re-listening via the Ethical Consumer website. Whilst all the subjects discussed were fascinating and eye-opening, this is the area about which I knew the least and felt it essential to share a greater understanding of how companies avoid tax and how they may be excluded from public sector contracts.
Paul has been involved in the area of Corporate Responsibility for 25 years. Ethical Consumer was also at the forefront of getting the Fair Tax Mark set up. Over this period of time, virtually every issue relating to corporates has seen progress – apart from executive remuneration and tax avoidance. All that changed in 2011. However, it was as long ago as 1961 when John Kennedy expressed concerns about this self-same problem.
The extent of brazen tax avoidance forced people to come together and take action: journalists, politicians, campaigners and corporates all took a stand and wanted to state their part and, in the case of companies, show that they were being honest. Whilst the EU is one of the most aggressive regulators of this avoidance, when they took Apple to court it was about actions from 25 years hence. Paul pointed out that most people also knew who the bad guys appeared to be eg Starbucks, Facebook, and there was no way of rewarding the companies showing integrity.
With no movement by 2014, the Fair Tax Mark was set up. It helped identify those companies who were quietly paying their taxes and avoiding tax havens. They met resistance by corporates who said it was too complex and wouldn’t stand up. But they were proved wrong and reckon they must have been right when KPMG (one of the major auditors) rubbished it and claimed they were bringing out their own version – which they didn’t. It was clear that businesses needed a policy on corporate tax.
The Fair Tax Mark looks at whether companies do business with tax havens; who the beneficial owners of the company are; tax rates have to be disclosed, as well as deferred tax; and this must be listed country by country. Points are awarded for filing your corporation tax return – because nobody at HMRC checks to see if this is done. It is in essence a voluntary standard for something that should be mandatory, but isn’t.
At first Co-ops and social enterprises came on board, alongside mutual societies, then FTSE businesses and private companies started taking note. That was when the Financial Press took an interest. But the Fair Tax Mark does not leave it to the market to enforce – it needs regulatory teams. Some local councils have changed their procurement guidance to shun tax evaders and avoiders. In fact some Councils are arguing about which political party started the work or has now moved to enforce this decision as they want to take the credit for taking this change forward.