The level of interest in last week's post on the Fair Tax Mark has been such that we want to say some more about it and encourage further debate on the issue.
Why was ICAEW supportive in principle? Because we believe - and always have believed - that reasonable measures designed to increase transparency in company accounts should be welcomed. This includes disclosure of tax related information.
If a company wishes to disclose more about its tax position than is required by law then it is free to do so, just as a company wishing to stick rigidly to minimum disclosure required by law is free to do so. This freedom of choice is a fundamental right in our society.
The letter of the law must always be respected. If the law isn't delivering the result Parliament intended then it should be changed. When the discussion moves away from the actual letter of the law to the more subjective spirit of the law, to fairness and to parliament's intentions, different people inevitably have different interpretations. That is as true of ICAEW Chartered Accountants as it is of any other section of society.
We would have grave reservations about a Fair Tax Mark that was awarded by a self-appointed group. Such a mark would have little credibility. In the version that was launched last week, steps have been taken to address this concern. The Mark is applied for, not awarded and no company is obliged to apply. In the main, the criteria seem to us to be those many companies already meet. It gives UK companies wishing to make a public statement about their tax affairs an opportunity to do so, should they wish.
As it currently stands therefore ICAEW sees the Fair Tax Mark in its new guise as a positive development.
It is not without its challenges and, as you would expect we have some reservations. We disagree, for example, that only corporation tax is important in measuring a company's contribution. Employers' NIC is a real cost to employers and a real tax burden. PAYE and VAT may be collected on behalf of government rather than being borne by the company but if the company did not employ the individuals or generate the sales in the first place, there would be no PAYE or VAT to collect.
We also believe that it is wrong to dismiss the idea that companies consider tax rates when deciding whether or not to locate in the UK. Views differ and there is an equally valid view that if the UK tax regime is attractive then more companies will locate here and the tax base will expand. If this results in more tax flowing into the Treasury then that must be good for the UK.
The Fair Tax Mark is also initially only available to companies that trade solely in the UK. A similar mark is surely appropriate for unincorporated businesses. Extending the mark to UK-owned multinationals and to foreign-owned multinationals with subsidiaries in the UK will pose some considerable challenges.
Finally, there must be total transparency and consistency in the criteria for assessing ‘fairness' if the mark is to achieve the necessary credibility. The mark must explain how and why its assessment differs from that of any relevant authorities if their assessment of ‘fair' and ‘right' is to be widely accepted.
We would not support a mark that was imposed or one that involved companies being branded for failure to sign up. We do support freedom of choice and believe it is right that consumers should be concerned about the attitude that businesses take to tax.
In short we believe that the Fair Tax Mark is a positive development but that to succeed it needs further work and above all it must be seen as clearly independent in the same way as accounting standards.
I welcome this statement: it remains broadly positive about the Fair Tax Mark. How could I object to that?
The Institute reflects some comments made by others. For example, there appears to be demand for a Fair Tax Mark for unincorporated businesses alto Institute offers no better clue as to how this can be offered when such the businesses are not required to put their accounts on public record than any other commentator has to date. I would be interested to discuss this with them.
Likewise, the Institute suggests that governance is a key issue. Maybe they would like to nominate a representative to work with us?
What I can say is that we are very definitely open to all developments so long as they serve the best interests of consumers who wish to decide between companies on the basis of their tax compliance because that is the core of what we are about.
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Since you are happy to require voluntary disclosure of additional information from companies, why not just make publishing accounts a requirement for the unincorporated FTM?
Even if we did those accounts do not show tax liabilities
And I think asking to publish tax returns is a step too far
What do others think?
Why is asking for voluntary publication in the FTM context a step too far, when mandatory publication is OK under your draft United Kingdom Corporate and Individual Tax and Financial Transparency Bill? I’d find it far easier to support the former than the latter.
Presumably you could operate some level of redaction in respect of non-business and “personal” information?
a) Because that was Michael Meacher’s idea
b) Because it only applied to a very few people
OK, fair enough re the Draft bill.
But what about the redaction point? I know the whole “how trustworthy is FTM” thing is another debate, but I think a lot of people might assume that the FTM team are actually doing some qualitative analysis, and as such would accept just a few key metrics off a tax return allied to a “we’ve looked at the rest of it & it’s OK” type accreditation? Otherwise it does run the risk of just looking like a transparency mark, rather than a fairness mark – and that could be problematic from an implementation viewpoint where it runs up against individual privacy considerations, not to mention a credibility viewpoint if people ask why they’re having to pay just to prove that they’re complying with disclosure provisions& tax law.
I have told you, we will look at these issues
I can’t see why non corporates can’t apply for the Mark. Their computations can be reviewed confidentially.
How about making the Fair Tax Mark a prerequisite for obtaining Public contracts, ranging from National to Local to Quasi e.g. NHS Trusts?
Stephen
It is clear that there is a growing demand for a Fair Tax Mark for unincorporated businesses and it is a demand that we will have to respond to. My suspicion is that we will do it through the accountants to these unincorporated businesses. We are putting together a scheme so that accountants can assess their clients, suitability for the Mark at this moment.
Regarding procurement, there are legal difficulties: we are working on them
Richard
I meant to say well done in involving the Professional Institutes. But as much of tax abuse is carried out by large and multi nationals I hope that focus – yet again- is
not placed on the Compliant rather than the Non Compliant. I rest my hope in Consumer
Power that to be blunt will not buy from those who will not seek the Fair Tax Mark.