On Tuesday 18th of March, Caroline Lucas MP led a debate in the Commons on the topic of the Fair Tax Mark, reports Joanna Long.
Ms Lucas, the Green MP for Brighton Pavilion, read a prepared statement on the Fair Tax Mark and wider issues of corporate tax avoidance. She then had the opportunity to put a range of questions to the Treasury Minister, David Gauke.
Here is what she said and how he replied.
1. The Fair Tax Mark and CSR
Ms Lucas asked whether the Minister welcomed ‘the development of the Fair Tax Mark and the necessity of tax being a mainstream issue for corporate responsibility.’
Mr Gauke welcomed the potential of the Fair Tax Mark to be a ‘particularly valuable contribution’ to the debate on tax avoidance. He also offered praise for ‘any business moving to improve the transparency of its own tax affairs’. However, unfortunately he refused to comment specifically on tax and Corporate Social Responsibility more broadly.
2. Country-by-country reporting and disclosure
Ms Lucas raised the issue of country by country reporting, which would require multinational companies to publish separate accounts for each and every jurisdiction in which they trade and, in doing so, would reveal any profits being shifted from locations with higher tax rates to those with lower tax rates. She described being encouraged at David Cameron’s apparent expressions of support for this and then disappointed at the Government’s efforts ‘to ensure that the information will not be required by the new EU Accounting Directive.’
Mr Gauke’s response focused on helping HMRC to implement forms and procedures that would enable them to collect ‘high-level information that could tell them [whether] a high proportion of profits were being transferred to a low-tax jurisdiction.’ Where the EU Accounting Directive was concerned, Mr Gauke maintained that ‘tax is principally a matter for member states’ and expressed concern about ‘tax measures being included in a non-tax directive.’ He did not comment on the need for or possibility of country-by-country reporting itself.
3. Reform of disclosure rules on tax liabilities and payments
Ms Lucas said that ‘the time has come for the Government to initiate reform in the disclosure required concerning tax liabilities and payments in the accounts of UK companies’ and she called on the Minister to hold a review ‘to determine what disclosure should be made to ensure that we can hold all companies — large and small, national and international — to account for the tax that they should pay in this country.’
Mr Gauke referred back to conversations he had had with HMRC officials into information gathering and the development of ‘a high-level tool’ requiring multinationals ‘to report to tax authorities on where they make their profits and pay their taxes around the world. We also proposed a tool for securing more extensive information exchanges to tackle tax havens and pierce through the corporate veil.’
However, he also stressed emphatically that any measures should not ‘impose unnecessary burdens on businesses’ or ‘create a whole lot of bureaucracy that does not necessarily help tax authorities much.’
4. Public sector procurement and rewarding responsible tax payment
Ms Lucas’s final point concerned how the Government intends to reward responsible tax payment, questioned why the Government back-tracked on ensuring that public sector contracts over £5 million would not be awarded to companies that aggressively avoid tax simply because of some (entirely surmountable) compatibility issues with EU law.
Mr Gauke made no mention of these previous plans and any intention to revive them, simply stating that it was his Government that had introduced rules where none had existed before. New rules coming into effect on 1 April 2014 would oblige suppliers to self-declare their compliance with tax rules and that ‘Departments will have the ability to terminate a contract on the basis of such a declaration, if they so wish.’
The Fair Tax Mark would like to thank Caroline Lucas MP for her tireless efforts in campaigning for fairer and more transparent corporate taxation. We are proud to say that she is joined by a further 46 MPs from eight political parties taking a stand on fair tax.
We hope that the Government will continue to build on its efforts in this area without watering down the demand that companies become accountable to the public on tax and we hope also that it will continue to welcome our initiative as providing part of the solution.
You can read the full text of the debate here.