At the Fair Tax Mark, we occupy unique ground in the tax territory: while campaigners rail at corporate misbehaviour and consumer mistrust reaches an all time high, we provide a positive mechanism for companies to show they’re doing the right thing on tax. This makes us well placed to understand current corporate sentiment around tax and two points are abundantly clear: first, tax as an issue in need of management isn’t going away – if anything, it’s becoming more crucial month by month. Consumers have long been interested in corporate tax behaviour, with the Institute for Business Ethics repeatedly finding tax to be the public’s top concern in their annual surveys. But now we’re experiencing increased interest from two further stakeholder groups: councils and investors. The former are recognising their power as contractors and using that to encourage fair tax practices. In partnership with Christian Aid, we’ve been helping to make that happen. Councils in England alone spend £45 billion a year buying goods and services from companies. By working with them to embed fair tax requirements in their procurement process, we’re helping to ensure lucrative business goes to those paying their fair share. The response from councils has surpassed our expectations with a dozen committing in just a few months and more expected to follow suit. And shareholders want to know their invested companies are managing tax risk well, which means avoiding scandal and fines, but also scoping future requirements and communicating coherently around their tax planning. They talk to us because our criteria provide a useful and robust methodology for them to assess how their companies are doing.
All this scrutiny means that it’s time for companies to embrace tax. But the second point we notice is how fearful businesses can be about this, and on a practical level, how far there is to go in joining the dots internally. Corporate social responsibility has a comfort zone: think things like green credentials, health and safety, wages. Tax remains outside that comfort zone yet it’s the hottest topic there is for most stakeholder groups at the moment. In the words of one of our accredited FTSE-listed businesses, it’s really time to take the “brave pill” on tax. Companies need top level management to take responsibility for this, ensuring responsible tax policies are in place and are substantively acted upon. More than that, they need to be giving their staff the tools to talk about tax clearly and coherently: when did your tax team last sit down with your comms people? How is tax risk addressed in your annual report? Are you viewing tax as a headache or as an opportunity to talk about the contribution your business makes to society? Breaking down internal silos between departments and embedding responsible tax practice as a core principle is vital for any smart 21st century business.
In September Caroline Flint MP won an amendment to the Finance Bill which enables the Treasury to require public country-by-country reporting in the future. Most tax experts and campaigners believe it’s only a matter of time until this happens. Fair Tax Mark companies with multinational operations are already publishing this information as part of their accreditation, but how are other companies future-proofing? If tax remains a black box issue, they’ll be on the back foot with regulatory requirements. Our businesses are leading us into a future where responsible tax practice is the norm but right now, they’re the exception. As government requirements on tax disclosures increase, councils opt to award contracts to companies which prove they pay their fair share, and investors start asking tricky questions, we firmly believe the time has come to normalise responsible tax practice on a much wider scale.