Public concern at corporate tax practices is not just a private sector issue. We need greater transparency when it comes to public sector procurement too
Last week saw the launch of the ‘Fair Tax Mark’, a concept developed by a group of tax campaigners and tax experts. This most welcome initiative is intended to provide independent accreditation of responsible tax practices by businesses.
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 at the right time and in the right place.’
It has been designed so as to be usable and affordable for small companies, as much as for international global corporates. Companies already signed up claim that it makes good business sense to do so.
Corporate taxation is complex so simply studying public annual accounts will often not tell the reader whether she/he is looking at the accounts of a company that adopts ethical tax practices or not. The Fair Tax Mark can offer the necessary confirmation and reassurance.
The launch of the Fair Tax Mark follows growing public and political concern that some major corporates have paid none or very little corporation tax for several years, with the list of these businesses including some with significant public sector contracts across the UK’s public services.
With evidence of increasing public concern about the behaviour of some of the major banks and recent revelations and admissions of guilt by major public service outsourcing companies, the Fair Tax Mark is just one of several initiatives to test and verify the ethical standards of businesses across the UK.
Along with others, I have for some time now been arguing that when procuring services and goods using public money, public bodies should take into account, amongst other matters, the tax policies and practices of bidders.
If companies are in receipt of tax payers’ money, it is only right and proper that they should themselves pay fair taxes. However, until now it has been easier to make the argument than to turn it into practice.
The Fair Tax Mark could be the solution. Bidders should be required to demonstrate that they have fair and responsible tax policies and practices, and the Fair Tax Mark is one way for them to demonstrate compliance.
That said, it is doubtful that the public sector can require all bidders to adopt the Fair Tax Mark as a condition of bidding given that such a requirement is almost certain to fall foul of current domestic and EU regulations. Still, in the longer term, I hope that procurement law experts and, if necessary legislators in Westminster and Brussels, will be able to find the means to make such requirements possible
There are of course many other standards that public sector bodies might wish to take into account when awarding contracts. These relate to governance, transparency, remuneration, employment practices, supply chain ethics, track record, and ownership issues.
More work needs to be done to make such matters central to public procurement as much as the pursuit of value for money, or best value, or social value. It would be great to develop similar standards and independent verification systems for these other critical factors too along similar lines to the Fair Tax Mark.
I firmly believe that public procurement should be used, openly and vigorously, to drive wider social, economic and environmental agendas. The bottom line should be that where public money is being expended, it should only be going to organisations (be they business, social enterprise, public, voluntary or community) that are ethical and aligned with contemporary public policy values and goals.
The Fair Tax Mark will, I am certain, have huge impact on corporate behaviour and it would be fantastic to think that it could bring some greater enlightenment and transparency to public contracts; and ensure that they are awarded to contractors with ethical tax practices.