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?

Here are my initial thoughts – I’ve hardly scratched the surface yet. The FTM website sets out its detailed criteria for determining, among other things, whether a business “has adopted a fair tax policy that suggests it is seeking to pay the right amount of tax (but no more) in the right place at the right time, where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes”.

The new format has received a qualified welcome from some tax professionals and commentators. Many tax advisers have already expressed a distaste for aggressive tax avoidance and have welcomed the new general anti-abuse rule which, it should be remembered, has not replaced but sits alongside a large number of targeted anti-avoidance rules.

Some commentators have suggested that the FTM might follow in the footsteps of Fairtrade. Others have poured scorn on the idea.

A “tax transparency” blog hosted by Mazars for experts to share their personal views in a “more neutral forum” provides a useful insight into some of the concerns that the FTM needs to address before it can win widespread, unqualified backing among tax experts.

The new FTM deserves a fair hearing. But your idea of a “fair” hearing may not be the same as mine, and this is the key challenge faced by Richard Murphy and the rest of the FTM team – what is a “fair” amount of tax?

Tax law is complex, and governments have decided over many years to provide a range of allowances, reliefs and exemptions.

The FTM team is not HMRC, and in the event of a dispute it is for the courts to decide, for example, whether a transaction or arrangement is caught by one of the many existing anti-avoidance rules.

Paul Connolly has warned of the FTM’s “potential destructive impact”. He has just posted this:

“This FTM campaign fundamentally claims that it is fit to adjudicate who is paying fair tax and who is not. It does not have the legitimacy of having a long hard earned reputation of an organisation like Fairtrade, but by presenting itself as something like Fairtrade deceives us into thinking that it does. Firstly, it uses the anger in us to create a ‘them’. This is anyone who does not have a FTM badge. For good measure it preys on our fear of reprisal: ‘If I don’t get a FTM badge, people will do a Starbucks on me’, to convince the uncommitted to join the ‘us’. We all know how ‘us’ and ‘them’ stories end.”

Connolly has a point. On the other hand, campaigners argue that some tax reliefs are too generous and are open to abuse, and that lobbying for changes in the law is not enough.

The next few weeks will be interesting.

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

  1. And companies like Starbucks and Amazon are excluded from FTM. So they can never get the mark. Looks like a deliberate act so that the promoters can say that Starbucks et al don’t have the “mark” without saying that they can’t get it.

      • The bigger problem in terms of exclusion is that there appear to be no plans for an award for unincorporated businesses.

        By asking people to prefer businesses showing the Fair Tax Mark, you are asking them to discriminate against unincorporated businesses too.

  2. […] 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. […]

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