The tax avoidance backlash just keeps building

April 02, 2015

No CSR issue has entered the public consciousness like tax avoidance, writes Paul Monaghan. It’s time for responsible businesses to take notice.


‘Tax’ really is the corporate responsibility issue of our day. How a business responds to this issue now defines how it is viewed by a significant proportion of the public. In terms of reputation: it overrides the use of Fairtrade coffee beans by high-street retailers; it abrogates the use of renewable energy by tech giants.

Politicians the world over are now (at last) initiating the beginnings of a crackdown. The first quarter of 2015 has ushered in a plethora of fresh activity.

The UK government is promising everything from a novel tax on diverted profits (the so-called ‘Google Tax’) through to new penalties for those who advise on tax evasion. In the United States, President Obama wants to introduce a one-off transition tax on the $2 trillion of US profits stashed overseas. Following last year’s LuxLeaks scandal, the EU will look to force its 28 Member States to share details of any sugar-coated tax deals agreed with business. And globally, the OECD has announced that it is ahead of schedule in securing international agreement on measures to tackle Base Erosion and Profit Shifting (BEPS), such as the introduction of country-by-country reporting.

Early 2015 also marked the first birthday of the Fair Tax Mark – the world’s first independent accreditation scheme for businesses who want to demonstrate that they are open and transparent about their tax affairs and pay the right amount of corporation tax at the right time and in the right place. In February, the Mark secured both its first international retailer in Lush (which has stores in some 49 countries) and its first recertification in Midcounties Co-operative (the UK’s largest independent co-operative society). They join pioneering social enterprises such as the Phone Coop and Unity Trust Bank, and FTSE-listed giants the Go Ahead Group and SSE plc. We are even seeing the emergence of Fair Tax Marks in other countries. At the end of 2014, the major parliamentary parties in Denmark called for the establishment of a Mark in their country.

In one sense it’s quite astonishing that it’s taken so long for a Fair Tax Mark to emerge, given the public’s heightened levels of concern. In the UK, the Institute for Business Ethics has found for the last two years that corporate tax avoidance is the number one concern of the public when it comes to business conduct. In the United States, Americans for Tax Fairness have detailed how poll after poll finds that a large majority of Americans want to see radical action to be taken on tax avoidance.

One reason for the inertia has been the view that the subject is amazingly complex and needs to be left to ‘accountants’ – which is nonsense, especially when one considers the complexity of Fairtrade supply chains or the science of what constitutes a sustainable Forestry Stewardship Council (FSC) woodland or Marine Stewardship Council (MSC) fishing stock.

Another reason is, quite frankly, the aversion of many Corporate Responsibility professionals – who would walk a mile to avoid discussion on the issue. But the horse has now bolted and one way or another business (and their advisers and accountants) are going to have to engage with this issue in a much more progressive way – as foreseen by Corporate Citizenship back in 2011.

Of course, the ultimate answer to retrieving the trillions of tax revenues that are going astray is legislative reform and the robust enforcement of regulation. The Fair Tax Mark is firmly part of the broader campaign for Tax Justice, in the same way that Fairtrade supports the call for Trade Justice, and FSC and MSC are champions of nature conservation and resource sustainability. But in the meantime, ethical kitemarks will play an increasingly vital role and signal to the world at large that everyone is not “at it” and positive change is more than feasible.

As Margaret Hodge MP, Chair of the UK House of Commons Public Accounts Committee, said last year: “The reaction to the revelations about the tax practices of big names like Starbucks, Amazon and Google shows that this is an issue the public really cares about. 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. 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.”

The time really has come for responsible tax payers to differentiate themselves from the avoiders and evaders, and lead the next big development in corporate responsibility.


Paul Monaghan is a Founding Director at the Fair Tax Mark.