The Fair Tax Mark is worthy of constructive debate

I said last weekend that the launch of the new Fair Tax Mark may come to be seen as a turning point in the tax debate, and that the initiative deserves to be considered on its merits. There has been a good deal of debate (mostly on Twitter and blogs) since then, and I would encourage tax professionals who have not yet done so to take a close look at the FTM website and engage constructively in the debate. I’ll look at some of the questions that have been raised shortly.

This week both the Institute of Chartered Accountants in England and Wales (ICAEW) and the top 10 accountancy firm Baker Tilly have given a cautious welcome to the new initiative. They are right to do so, and this is a significant development that could encourage many owners of SME companies to apply for accreditation very soon.

Baker Tilly said the FTM would take a while to establish itself:

“Nevertheless, we welcome this as a promising step towards greater public transparency and accountability in business taxes.”

ICAEW’s Tax Faculty team said the FTM was “an initiative we are right behind”. The public would benefit from having a simple way to tell if a company was paying a fair amount of tax, it said. Continue reading

The new Fair Tax Mark deserves a fair hearing. But what is ‘fair’?

Telecompaper has reported: “UK telecoms provider The Phone Co-op has become one of the three first businesses to be accredited by the new ‘Fair Tax Mark’ responsible tax accreditation scheme. The Mark shows 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.”

No further information is given about the scheme or its creators. But we can expect to see many short news stories like this in trade magazines if the new Fair Tax Mark (FTM) takes off, and on the face of it here is an opportunity for businesses to set themselves apart from those accused of tax avoidance.

Last week’s re-launch of the FTM has received little mainstream press coverage. There has been a sponsored article in The Guardian and a short opinion piece in The Independent. But the re-launch may possibly come to be seen as a turning point in the confused and often heated tax avoidance debate. Many owners of small and medium-sized companies – the new FTM’s initial target market – may be interested in applying for accreditation in order to demonstrate that, unlike some of their competitors, they regard tax as a contribution to society (rather than a cost like any other) and do not seek to play the system.

The initiative deserves to be considered on its merits. But my initial enthusiasm for the new approach is tempered by an old question that will not go away:

What is the “right amount” of tax, and who decides? Continue reading

Tax reliefs under scrutiny as Hodge defies critics (Tax Journal)

  • Commons public accounts committee insists that recent reports and forthcoming tax reliefs inquiry are within its remit
  • Much can be done unilaterally to combat BEPS, says David Quentin
  • Debate resembles ‘the court of the Queen of Hearts’ at times, says Heather Self

The Commons public accounts committee has defended its ‘robust’ scrutiny of tax issues and denied exceeding its remit, following reports that a senior Treasury figure warned in an off-record media briefing that the PAC’s work was having an ‘impact’ on inward investment.

The briefing drew an angry response from committee members, including the Conservative MP Stewart Jackson, who told The Guardian: ‘I don’t think there is any evidence that any of our inquiries have had any influence on hard-headed businessmen considering whether they should come to Britain.’

A PAC spokesperson told Tax Journal: ‘We make no apologies for scrutinising issues robustly.’

Read more at Tax Journal (registration required).

Tax and development: Some essential reading on taxation of multinationals

If you need a better understanding of the controversy surrounding taxation of multinationals – and why the OECD is working on what one tax professional has called “a lifetime opportunity for governments to change the international tax landscape” – here is some essential reading.

Martin Hearson is a doctoral researcher at the London School of Economics and Political Science, focusing on the political economy of international taxation in developing countries. Working with the Norway-based U4 Anti-corruption Resource Centre, he set out to provide an “even-handed summary” of views on how tax-motivated illicit financial flows (IFFs) undermine efforts to help developing countries reduce their reliance on foreign aid.

The outcome is a 50-page guide for development practitioners, but the paper is likely to be very useful for “non-specialists” who may find – to quote the abstract – that “the complex discussion on taxation and IFFs is further complicated by the lack of clear definitions of relevant concepts, and by the often polarized nature of policy debates”.

Some tax professionals argue that the “aggressive tax planning” that is being addressed by the OECD’s action plan on “base erosion and profit shifting” is not technically “tax avoidance”. Such planning exploits gaps in the international tax system, and the only lasting solution is to change the law.

But for the purposes of the paper Martin has adopted (see 1.1) a broad definition of IFFs to incorporate “practices such as lobbying for tax incentives, transfer mispricing, trade mispricing, and exploiting tax treaties for tax avoidance”.

Martin’s paper is a timely, measured and informative contribution to the tax debate and it deserves wide circulation.