The Fair Tax Mark and rebuilding post Covid-19

The team at Fair Tax Mark are working on a new set of international standards

Co-ops have been among the pioneers of a movement calling for more tax transparency and a clampdown on business tax evasion. Such calls could become even more important in the context of the Covid-19 pandemic, which has seen public services set up efforts to respond to the crisis. 

Launched in 2014, the Fair Tax Mark certification scheme seeks to encourage and recognise organisations that pay the right amount of corporation tax at the right time and in the right place. The first three businesses to obtain it were the Midcounties Co-op, the Phone Co-op (now part of Midcounties) and Unity Trust Bank.

“We’ve continued to see real support from co-ops of all sizes, from larger ones such as the Co-op Group, Midcounties and Scotmid, through to smaller individual co-ops like Eighth Day, Unicorn and Suma,” says Richard Livings, head of operations at the Fair Tax Mark.

“There is something about the co-op structure and ownership model, be they member owned or worker owned, that makes them understand their responsibilities to a wider set of stakeholders. Co-ops have always got the idea that businesses exist for more than just trading – they are there to do more than that.”

Shopping from businesses that are transparent about how much tax they pay remains of utmost importance for UK consumers, according to the Fair Tax Mark’s annual survey.

Involving 2,000 adults across Britain, the 2020 Fair Tax Mark Poll revealed that more Brits want greater accountability for businesses on tax avoidance and social responsibility.

Eight in ten people (82%) questioned believe businesses benefiting from bailouts should be forced to agree terms that prohibit tax avoidance and enforce responsible tax conduct. Furthermore, respondents said they would rather shop with (79%) or work for (82%) a business that can prove it is paying its fair share of tax.

Mr Livings says the lockdown has increased public support for businesses that pay the right share of tax, helping to support the public sector.

“The poll shows that payment of tax by businesses continues to be something that animates and enthuses the British public and consumers. The response to crisis has seen increasing pressure on NHS and reliance on services, along with an understanding of how important various public services supported by tax are,” he explains.

As economies across the world are beginning to reopen, businesses are
exploring what the new normal might be. Some will require loans or additional support from the government to continue operating. Here, too, the public opinion has shifted towards supporting enterprises that commit to a new way of doing business.

“We believe in a Fair Tax Lockdown where regardless of a businesses’ previous contract, the public would expect it to commit to tax transparency and new way of doing business,” says Mr Livings.

The Fair Tax Mark team is working on developing a new suite of international standards, which would enable the certification of businesses that have their ultimate holding company situated outside of the UK. In July it published The Essential Elements of Global Corporate Standards for Responsible Tax Conduct – a report sponsored by a grant from Luminate, which tracks and analyses the many responsible tax initiatives that are now in play across the world. The research will be followed by a public consultation and will influence and guide the Fair Tax Mark’s consideration of a new suite of international standards.

“We cannot use our current methodology on businesses headquartered
outside in the UK,” explains Mr Livings. He adds: “Throughout the life of the Fair Tax Mark we had international businesses and organisations from different jurisdictions asking for help or guidance for developing an international Fair Tax Mark in different countries, so we know there is a demand there.”

The consultation will aim to gather information about best practices in different jurisdictions. The Fair Tax Mark team will also run webinars to involve various stakeholders in the conversation.

“Ideally, we would like a Fair Tax Mark to be available to businesses anywhere in the world, but we need to be mindful of the fact that tax reporting varies in different areas. We are currently running an online consultation on our paper setting out the essential elements of future international tax standards to help us understand these better,” says Mr Livings.

The Fair Tax Mark has been an advocate for country-by-country reporting, which would involve the provision of data by multinational companies describing their operations in every country.

“We recognise there is a need for some method whereby the public and investors and everybody involved with a business can look at where profits are being made, where tax is being paid and have the ability to understand how a company is operating and what its attitude towards transparency is,” Mr Livings adds.

He explains that the Fair Tax accreditation is not just about whether a company is paying tax, but also how transparent it is about the reasons why it might not be paying the amount of tax expected.

“We recognise that there are plenty of legitimate reasons why a company won’t be paying certain amounts. However, increasingly complex international businesses are using tax havens, company structures or profit shifting. There is an entire industry based around creating structures that will help minimise a company’s global tax and that’s partly enabled by just how complex it can be to understand where a business in meant to be paying its tax and why it isn’t paying it in one jurisdiction and is doing so in another.

“We recognise that there is a need for an international response on country-by-country tax reporting and Fair Tax International is partly motivated by our desire to get involved in that debate and for people to recognise what a responsible business should be doing. We want to give an opportunity to businesses in jurisdictions other than the UK, who believe that paying tax is part of what any responsible business should be doing, to have a third party accreditation and independent verification that they are being transparent.”

He believes this kind of accreditation will be especially important in the
context of a changed world post Covid-19. Yet, with the whole world due to enter another recession, are accreditations such as the Fair Tax Mark at risk of losing out as companies look to cut down on costs?

Mr Livings says this has not yet been the case. “We’ve not seen any downturn in interest in the Fair Tax Mark. We recognise that there are some pessimistic broadcasts about the economy in general and specific business sectors. But we are seeing that those businesses who have their Fair Tax Mark and are associated with an attitude towards tax and contributing to the wider economy and contributing directly public services are embracing that as something businesses ought to do.

“As our polling shows, the public are saying they are more likely to want to shop from and work for businesses like that. 

“There is that fear that businesses will pull up the drawbridge and look to cut costs, but from both the polling and our experience so far, we think that whilst the economic climate will be challenging, one of the key differentiators to these businesses is going to be whether they are happy to support the wider economy through paying their taxes. So we are confident there are still plenty of businesses out there that want to appeal to their customers through that sort of messaging.”

With the mark potentially going international, there is an opportunity for co-ops in other countries to obtain the accreditation.

The Fair Tax Mark is inviting co-ops across the world to take part in the
consultation on the core requirements of its future global standards and join their webinars exploring contexts in different jurisdictions.

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