The ICAEW expands its opinion on the Fair Tax Mark

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The Institute of Chartered Accountants in England and Wales  issued the following statement on the  Fair Tax Mark on its website this afternoon:

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.