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Tax campaigners roll out Fair Tax Mark

19th Feb 2014
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Tax justice campaigners opened a new line of attack today with the launch of the world's first independent accreditation scheme to show an organisation has a responsible tax policy: the Fair Tax Mark.

The Fair Tax Mark officially launched today with representatives from the first "pioneer" businesses to adopt the mark: Midcounties Co-operative, Unity Trust Bank and The Phone Co-op. Public Accounts Committee chair Margaret Hodge was also there to show her support.

The mark was developed by a team of tax justice campaigners and tax experts and will be promoted and administered by a non-profit social enterprise. The new designation is designed to confirm 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.

After three years of high profile tax avoidance headlines, the public remains deeply cynical about how much tax businesses pay. The accreditation also comes at a time when the Institute for Business Ethics found that corporate tax avoidance is now the number one concern of the public when it comes to business conduct. 

Margaret Hodge said the reaction to the revelations about the tax practices of the likes of Starbucks, Amazon and Google showed the scale of public concern.

“Given the choice, many people would prefer to give their custom to a responsible business that does the right thing and pays its fair share of tax,” she said. “The Fair Tax Mark helps give them the power to make that choice, and seeing customers vote with their feet is perhaps the most effective deterrent there is to companies engaging in tax avoidance or other irresponsible practices."

Campaigner Richard Murphy, one of the founders of the mark, said it was the next step in the fight for tax justice.

“Around the world and here in the UK people are now aware that many big businesses routinely fail to pay the taxes they really owe. What they now want to do is spend their money with those companies who are doing the right thing by seeking to pay the fair tax that they owe in the right place at the right time.” 

Ben Reid, chief executive of Midcounties Co-operative, added: “Twenty years ago co-operative enterprises were front and centre in the launch and roll-out of the Fairtrade Mark, which is now the best recognised ethical certification scheme in the UK. I look forward to the Fair Tax Mark enjoying equal success in the years to come.”

AccountingWEB initially heard about the mark around four months ago when the campaign was originally conceived as a way of reporting that companies had paid a “fair” amount of tax.

Richard Murphy said he had listened to feedback during the initial trial period and re-designed the campaign as an accreditation initiative that small companies could use to differentiate themselves by their ethical stance.

The project is also appealing directly to accountants’ self-interest. Murphy said accountants can become assessors and give the Fair Tax Mark to their clients.

“It is a saleable product, for accountants to sell an explanation, even if there are tax mark requirements, and why it might work for them. We can sell it to accountants who can then sell it onto their clients,” Murphy said.

The Fair Tax Mark tackled three issues in the small business market, he added: marketing that you pay the right tax; accountants explaining to clients why they are paying tax; and indicating to HMRC that you are trying to be a good taxpayer.

When they meet the requirements clients will be able to put a Fair Tax Mark on their door which if it’s a retail premises might look quite good, he said.

Accountants will also be able to make use of the mark as a marketing tool.

“It’ll actually take the accountant to explain to their client just what the tax notes in their accounts mean, which will probably be a bit of revelation for many of them. It might differentiate accountants in the marketplace.

“Thirdly we think it will also help with the Revenue." Murphy said. "If you say ‘I’ve prepared my accounts on the basis of I want to make full disclosure’, then you’ll be in lower category of tax risk.”

To get the credential applicants need to have a tax policy in place and undertake not to participate in aggressive tax avoidance.

“We don’t expect full marks – they will need 13 out of 20 to get a mark” he said.

Using all the tax reliefs available to a business is also fine, according to Murphy: “You will never be de-barred from having a Fair Tax Mark for having a low tax rate. In fact you can pay no tax and still have a Fair Tax Mark.

“We will give more marks if you do pay tax and it will be easier to get the mark but you will never be stopped from getting the mark. You will need to explain why you do not pay tax in a lot of detail that we can understand. It will also require you to say 'we are not using tax havens artificially'."

AccountingWEB put to Murphy a concern that there may be push back from those who will see this as another piece of unnecessary red tape.

“They don’t have to do it, it’s a completely voluntary thing and up to the company. They’ve got to consider if it’s worth the modest investment [the rates will be published on the site today, starting from a couple of hundred pounds for an assessment up to several thousands of pounds for a large company]. It’s a very simple process for a small business and is about empowerment rather than imposition of regulation.”

As Murphy acklowedges, some important accounting assessments lie at the heart of the Fair Tax Mark. In particular, its definition of the right amount of tax is based on the premise that "the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes" A compliant business will also be transparent about who owns it, what it does and where it operates, and will provide sufficient accounting data to suggest that its fair tax policy has been put into practice.

How to assess these points leads on to another idea Murphy is working on - the creation of a tax reporting standard. Murphy said the intention was to try and improve tax reporting and give companies a better understanding of their financial statements.

Murphy, who is involved in academic research and the ongoing OECD process around international tax issues, said there was a very obvious lack of understanding about the interface between accounting and tax.

“Financial reporting and tax are not doing each other any favours. One of the ideas is to put out tax reporting standards and the point is there is clearly is something that isn’t currently working.

“Existing financial reporting isn’t getting the right information for people to appraise if the right amount of tax is being paid.”

Tax rates, capital allowances and deferred tax charges in accounts are poorly explained, he added.

“What we’re trying to do with the Fair Tax Mark is part of that process. We’re trialling what better information would look like and then trying to conceptualise that into what a company is trying to do.

“It’s a programme that’s starting now,” he concluded.

The full methodology for the Fair Tax Mark, including examples and full support notes, is published today.

Replies (17)

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By mikefleming3028
20th Feb 2014 15:10

Lost for words!!!

A little bit of paranoia goes an awful long way, enough said!! 

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chips_at_mattersey
By Les Howard
20th Feb 2014 17:05

weblink

The correct weblink is: http://www.fairtaxmark.net

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By exceljockey
21st Feb 2014 09:30

How about a "Fair Value Mark"

for government departments that use tax receipts in the most efficient manner possible?

If there is a moral obligation to pay tax then there is a moral obligation to use that tax as efficiently as possible which means politicians need to make decisions that are in the best interest of the country and not decisions that are aimed at ensuring the get re-elected.

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Stepurhan
By stepurhan
21st Feb 2014 14:10

Concerns already

I will take time to look at the proposal in more detail, but there are a couple of things that worry me already. First, this comment from Richard Murphy in the article.

Richard Murphy wrote:
“Around the world and here in the UK people are now aware that many big businesses routinely fail to pay the taxes they really owe. What they now want to do is spend their money with those companies who are doing the right thing by seeking to pay the fair tax that they owe in the right place at the right time.”
That is possibly the worst example of completely ignoring the difference between tax avoidance and tax evasion I have ever seen. This is not the first time Richard Murphy has said such things. If one of the main people behind it is unable to comprehend a clear legal difference, then I worry about the criteria that will be used to judge this mark. This is further reinforced by the vague definition of "the right amount of tax" on the website. Who gets the say on what is legitimate reduction in tax due and what is "wrong".

Speaking of the criteria, how can this already be rolled out with this on the front page of the website?

Tax Mark website wrote:
Please note that the Criteria are subject to an ongoing process of development and are likely to change in subsequent years.
I haven't read the current criteria in full, so I am not making any comment on them. Regardless of what the criteria are now, it is hardly helpful to have them shifting. A kite mark is a clear statement of quality production. How is the Tax Mark going to be a statement of anything if what it meant last year may not be the same as what it meant this year? This is even before you consider the scoring. A company that scrapes by with 13 will get the same mark as a company that scores a perfect 20. Surely the latter company is better on tax, and thus allegedly more deserving of custom, but this Mark shows them as the same to the public.

The whole sales opportunity also strikes me as worrying, especially if accountants themselves can become assessors. A set-up more ripe for corruption I find it hard to imagine.

I am not surprised Margaret Hodge supports this. It makes it look like she is getting tough on big companies without actually having to do anything. I'm no happier than anyone about artificial schemes to avoid paying tax, though I do recognise the difference between those that use the law artificially and those that just break it. This is not the answer to that problem.

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By Jekyll and Hyde
22nd Feb 2014 08:47

Chris Moyles is another example.....
... of why I believe there is greater concern in considering whether a 3rd category is needed. Perhaps legal tax avoidace, criminal tax evasion and legal tax abuse.

This scheme is deception at best and is not considered by anyone I have spoken with to be right. As one person pointed out, if he had stolen that amount of money he would be facing a prision sentence, but as it was only tax that was stolen he is not.

I accept tax isn't this simple as shoplifting and theft is, but it looks to me like this scheme is centred around deception, dishonesty and fraud and criminal actions should be taken.

For me this is no different to some of the corporate tax avoidance schemes that I have read about, centred around deception,dishonesty and fraud.

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By Mike Bassy
23rd Feb 2014 13:13

 "" a genuine effort to be

 "" 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."

Does anyone know what this means ? It looks like a variable answer according to the eye of the beholder. 

And as for accountants boasting that they belong to this scheme, I'll be interested to see the success of any business model which proclaims: " Come to us and pay more tax. " 

Face up to reality. The main reason why clients employ accountants is to reduce their tax liability. Otherwise, everyone would simply hand their affairs over the HMRC and let them decide. 

However, I do enjoy listening to Richard Murphy. Although he takes himself very seriously, I suppose we should be grateful that someone does. 

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By AndyC555
24th Feb 2014 11:19

Dangerous Bolleaux

This really Is dangerous nonsense.

Murphy setting himself up as arbiter of what the "right" amount of tax is.  The LAW decides what the right amount of tax is but Murphy is self-appointing so that if HE decides that a company ought to be paying more because HE decides the economic substance of a transaction ought to be elsewhere than the law says it is he will (no doubt with pompous bluster) announce that he is withholding the 'Fair Tax Mark' from some company doing nothing wrong.

 

 

 

 

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By AndyC555
24th Feb 2014 11:24

Priceless....
"Murphy... said there was a very obvious lack of understanding about the interface between accounting and tax."

One only has to read Murphy's blog to appreciate the truth of that statement.

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By Marlowe52
24th Feb 2014 12:28

I think this is a truly great idea

Really good idea.  I have already enquired on the website and would definitely want my companies to have this accreditation.  It is also a question we will start asking our suppliers.  I agree, I want to run companies that pay a 'fair' amount of tax and I would also like to do business with suppliers who do the same.

Frankly, I'm not in the least bit interested in the technicalities of 'avoidance' and 'evasion'. Evasion is not legal and we all know really where the line is between doing things in a tax efficient way and manipulating the books/our companies to avoid tax - albeit legally.

 

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Replying to mumpin:
Stepurhan
By stepurhan
24th Feb 2014 16:45

Very fuzzy line

Marlowe52 wrote:
Evasion is not legal and we all know really where the line is between doing things in a tax efficient way and manipulating the books/our companies to avoid tax - albeit legally.
Really, then please point out this oh-so-clear line to me.

Because I think you will find that, operating within the law, there is a broad spectrum of opinion on what is legitimate. Just review some discussions on these forums. Even relatively simple things such as wages to a spouse create wide variances. What is a legitimate rate for the work done? Is there a comparable standard wage to compare to anyway? Should a premium be allowed for ad hoc or unsociable hours? Should actual hours worked be kept, or will an estimate of the value suffice? Even on this comparatively simple subject the only clear line that people agreed on was that some work had to be done. If no work was done, but you still make a claim then that is evasion (illegal) and not avoidance (legal, but debatable).

At the extremes the differences are obvious, but there is no clear demarcation point in the middle.

Incidentally

Marlowe52 wrote:
I want to run companies that pay a 'fair' amount of tax and I would also like to do business with suppliers who do the same.

If a business is struggling to make enough for its proprietors to live on, are you really saying you will make life more difficult for them by insisting they shell out the fees for this (with no guarantee of getting the Mark anyway) before you will do business with them? If so, then yours is the sort of business I don't want to work with.

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By carnmores
24th Feb 2014 12:31

OK all you hypocrites

cancel your cross channel trips to buy cheap booze, support your local supplier :-)

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By raybackler
24th Feb 2014 13:26

SME Concerns

I have just checked on the website and SMEs will have to publish a full set of accounts, whereas  abbreviated are the only items on the public record at the moment.  Since full accounts contain a lot more information than just that related to tax, this will put a lot more information useful to competitors in the public domain.

It is for HMRC to assess from the full accounts and from the corporation tax return, whether the tax payable is correct.  HMRC have the full might of the law available to them if they want to challenge the tax computation.

I can understand the need for larger organisations with international businesses to demonstrate that their transfer pricing policies ensure that tax is paid in the right country, but I just don't get the need for SMEs to bother with this.  No doubt eventually contracts with government money involved won't be forthcoming where the Tax Mark is not in place, so I guess this could be used as a weapon to force SMEs trading in those areas to greater disclosure.

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By TaxTeddy
24th Feb 2014 15:08

"Fair" is a Four Letter Word

The previous commentators seem to have got this right - this is totally subjective.

Taxation is political. Period.

The government of the day drafts the tax legislation according to what it believes is right and of course this view is clouded by its own political bias. That is the nature of government.

Over and above that, it is NOBODY ELSE'S BUSINESS to say what is “fair". The tribunals and the courts have jurisdiction to decide whether the law is properly applied, but “fair" just doesn't come into it.

If you don't like the law then you should lobby Parliament to have it changed.

If you think tax law isn't properly applied you should lobby the government ministers responsible for administering it.

Anything other than that just looks like whingeing.

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By mbdx7ja2
24th Feb 2014 15:38

.

TaxTeddy wrote:

If you don't like the law then you should lobby Parliament to have it changed.

Problem is that is probably exactly what this is.  Creating a slush fund for Richard Murphy and co to lobby government (oh, and silence dissent by withholding their ethical trademark).

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By BigBadWolf
24th Feb 2014 17:07

Just another money making scam

Just another rouse to make money ... £200 - £4,000 to have the use of a logo! 

"Tax Campaigners" or just opportunists?

 

First Fair Trade  http://www.cracked.com/quick-fixes/4-reasons-why-fair-trade-coffee-scam/  now fair tax ...what next???

 

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By seeroo
21st Apr 2014 11:21

Concerned about the fees
We are considering becoming an assessor as some of our clients are interested and don't like tax schemes. I have some reservations about the publication of full accounts for small and medium companies and the annual fees that the fair tax mark people are charging for use of the mark especially for smaller businesses.

I also think that some consultation between the people running the mark, the accounting institutes and HMRC about the criteria would be a good idea.

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