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SSE wins ‘breakthrough’ fair tax award

20th Oct 2014
Freelance tax writer
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AIA

Tax campaigners claimed a “major breakthrough” today as energy giant SSE plc became the first FTSE 100 company to receive the Fair Tax Mark.

The accreditation scheme, re-launched in February, assesses “the quality of a business’s publicly available information on key tax and transparency issues”. Its criteria are based on a company’s tax rate and stated tax policy as well as the quality of disclosure of information that is not required by company law.

SSE has published a video, The Fair Tax Mark Explained. “SSE will now provide country-by-country data stating exactly what it does, what profit it makes, and the taxes it pays in each country in which it operates,” finance director Gregor Alexander said in a statement.

“SSE will also disclose its current tax separately from its full tax charge for each year; put on record what tax reliefs and allowances it claims and what impact they have; and explain fully how its current tax bills and deferred tax interact. Finally, SSE does not use artificial tax avoidance schemes or tax havens to reduce its tax liabilities.”

 ‘A new era’

“The first Fair Tax Mark certification of a FTSE 100 company creates a new era for fairer tax in the UK which means that more consumers can now choose to support an organisation that pursues responsible tax behaviour,” SSE and Fair Tax Mark Limited, a registered community benefit society, said in a joint press release.

SSE has operations in the UK and Ireland. It claimed to have set “a new benchmark for transparency and disclosure in the reporting of the tax affairs of a large UK company with international operations”.

Its chief executive Alistair Phillips-Davies said: “As a provider of an essential service SSE firmly believes it has a responsibility to contribute to the societies in which it operates. Paying the appropriate amount of tax is core to this; and we are determined to abide by both the spirit and letter of the UK’s tax regulations.

“Almost nine million SSE customers now have an independent guarantee that their energy comes from a company that seeks to pay the right amount of corporation tax, at the right time, in the right place and explains how it does that. Today we’re proud to lead the way and be recognised as the first FTSE 100 company to be awarded the Fair Tax Mark.”

‘Game-changer’

FTM director Richard Murphy said: “As was the case with Fairtrade and other successful ethical standards, we anticipate that the accreditation of a major FTSE 100 company will prove to be a game-changer for the reporting of responsible tax planning in the UK.”

He added: “Corporation tax avoidance costs the UK economy billions a year – money that is needed to support vital health, education and social security services in this country. The award of the Fair Tax Mark to SSE is especially welcome given that the company has significantly enhanced the tax disclosure notes within its financial statements, and has as a result established new benchmarks for corporate disclosure. It has set a standard that other UK based companies, including multinationals, now need to match.”

Transparency

Margaret Hodge, chairman of the Commons Public Accounts Committee, welcomed “SSE’s commitment to being open and honest about its tax affairs”.

Hodge said: “Too often companies hide behind commercial confidentiality to disguise their activities, claiming that transparency about their tax affairs would damage their competitiveness. I don’t buy that, and the public don’t buy that.

“SSE clearly feels it has nothing to fear – and potentially a lot to gain – from responding to public demands for greater openness. There is no excuse for other companies not to do the same, and make this new standard in transparency the norm, not the exception.

“This kind of information will enable we the public not only to see how much tax SSE is paying, but to make a meaningful assessment of whether this constitutes a fair and appropriate amount of tax relative to the profits it is making in the countries where it operates.”

Last week Andrew Tyrie, chairman of the Commons Treasury Committee, asked HMRC tax assurance commissioner Edward Troup to provide evidence to back his argument that ending taxpayer confidentiality would result in a loss of tax revenue.

Tyrie noted that taxpayer confidentiality had become “controversial” in recent years, and said the issue was “not going to go away”.

Informed debate

“It is interesting that a FTSE 100 company has sought the Fair Tax Mark,” said Pete Miller, a chartered tax adviser and founder of The Miller Partnership.

He told AccountingWEB that, while Hodge and the tax justice movement had been criticised by tax professionals for “ill-informed comments” about tax avoidance, they had “brought tax into the mainstream of public consciousness, which is a good thing”.

Miller added: “I hope wider use of the Fair Tax Mark increases tax transparency, making the debate better informed, in contrast to the current position where any company that doesn’t pay ‘enough tax’, whatever that means, must be avoiding it. There is still a lot of work to do before the Fair Tax Mark is widely recognised as a meaningful award but this latest news may be a step towards that.”

‘An important achievement’

Ray McCann, a partner at the law firm Pinsent Masons, said: “There is increased transparency in what SSE has published, but SSE’s reporting is in line with other companies who have nevertheless found that criticism of their tax policies has continued.”

McCann told AccountingWEB: “It will be some time before the public can put significant faith in the Fair Tax Mark as a way of ensuring that larger companies are paying their ‘fair share of tax’, but this is an important achievement for the fair tax movement less than a year after SSE and other energy suppliers were roughed up by MPs over tax and excessive profits.”

Growing acceptance of the Fair Tax Mark carried risks, he warned. “If the past few years have taught us anything it is that the more prominent ‘fair tax’ becomes the greater the risk that judging corporate tax behaviour by reference to a limited range of criteria could provide an undue degree of comfort to the public and cause damage to the existing accounting and tax regulatory structures.”

‘An encouraging start’

Alex Cobham, a research fellow at the Center for Global Development in Europe, who specialises in tax and development, tweeted: “Aside from being great for SSE, their getting the Fair Tax Mark also shows the required transparency is feasible for major multinationals.”

Christian Aid said country-by-country reporting provided critical information that can expose the use of subsidiaries in tax havens to help reduce tax bills. “Providing this information in public is a good indication that a company has nothing to hide,” it said.

The charity’s principal private sector adviser, Matti Kohonen, said today’s announcement was “an encouraging start”.

“The criteria for the award helps guard those holding it from the kind of reputational damage a number of multinationals have experienced as a result of their tax dodging antics,” he added. “Our main concern at Christian Aid is the damage tax dodging does to poorer countries. SSE doesn’t trade in the developing world, but plenty of other FTSE 100 companies do. It would be good to see some of them now sign up.”

Murphy said today that SSE was splitting its results between the UK and Ireland in a way that it had not done before. “This pioneers reporting on this basis in the FTSE 100 in a way that matches the recent demand of the OECD for the production of this type of data for tax purposes, but which the G20 did not have the courage to demand be placed on public record,” he wrote on his blog.

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By TaxTeddy
20th Oct 2014 14:39

I see their shares are down 17p

Pure coincidence

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