The benefits of tax avoidance being reduced are immense. Tax Research UK has estimated that corporate tax avoidance in the UK is currently running at about £10 billion a year. And recent polling from the Institute for Business Ethics has found that this is now the number one concern of the public when it comes to business conduct.
Of course, as the CBI points out, there are many legitimate reasons why a business will pay less than the headline rate of tax — but there are equally instances where businesses are bending the rules of the tax system to gain advantages that Parliament never intended.
The CBI is to be commended for recognising the importance of these issues as part of its Great Business Debate series — a debate that has moved on quickly in a short period of time.
2012 was the year that the world woke up to the issue of corporate tax avoidance, with the tax aggression of a number of businesses forcing the issue on to the front pages.
2013 was the year governments began to respond, with the UK‘s pledge to close the tax gap – the difference between the amount of tax they expect to collect and what they actually do — and the G8 nations accepting the need to clamp down on tax avoiders at their summit in June.
And 2014 looks to be the year that consumers became newly empowered to take action with their wallets — punishing the abusers and rewarding the payers.
The campaign for a more responsible approach to tax took a decisive step forward in February when Midcounties Co-operative, Co-operative Energy, Unity Trust Bank and The Phone Co-op became the first businesses to be accredited by a new Fair Tax Mark, the world’s first independent accreditation scheme to address the issue of responsible tax.
As Ben Reid, Chief Executive of Midcounties Co-operative, pointed out at the time: “Last year we contributed the equivalent of 15% of our profits to charitable causes and it makes no sense for us to undermine this by engaging in aggressive tax avoidance schemes even when to do so would be legal.”
The Fair Tax Mark certifies that a company is making a genuine effort to be open and transparent about its tax affairs and pays the right amount of corporation tax at the right time and in the right place.
As with our support for Fairtrade twenty years ago, Midcounties Co-operative was proud to help instigate ethical certification in an area crying out for intervention. And I’m equally pleased to see that, as with Fairtrade, we’ve subsequently seen big FTSE350 companies get involved – most recently SSE and Go Ahead.
The Mark has also secured the backing of some political heavy-hitters. Margaret Hodge MP, Chair of the House of Commons Public Accounts Committee has commented: “I think this is a fantastic idea…. seeing customers vote with their feet is perhaps the most effective deterrent there is to companies engaging in tax avoidance or other irresponsible practices.”
Caroline Lucas MP has tabled a cross-party Early Day Motion welcoming the Mark: “This is great news for consumers, for transparency, and for the principle that everyone should contribute their fair share.” In a significant development, the professional association of chartered accountants, the ICAEW, has come out strongly in favour of the Mark.
There is some way to go to reassure the public about what business is doing on tax, and the Fair Tax Mark offers those in the business community who are responsible tax payers the opportunity to differentiate themselves from the avoiders and evaders, and lead the next big development in corporate responsibility.
Pete Westall is the Co-operative Responsibility Manager at Midcounties Co-operative, where he has worked for 23 years. He is a member of the Society’s Executive team, with responsibility for the development of Midcounties Co-operatives’ Community engagement programme, Membership, Environmental and Young People Engagement teams — which collectively drive the Society’s Co-operative Social Responsibility commitment. Midcounties Co-operative is the largest independent consumer co-operative in the UK, with 9,500 colleagues spread across around 547 sites and sales of over £1 billion. It operates in a wide variety of markets, including Food, Post offices, Travel, Energy, Pharmacy, Funerals and Childcare.