Seven magnificent reasons to pursue Fair Tax Mark accreditation

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Paul Monaghan
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There are a thousand and one issues out there that business is being asked to champion – on top of the day-to-day challenge of thriving commercially in an ever more competitive world. Approaches and acronyms abound, be it ESG or CSR or SRI or SDGs, with each urging that a business prioritise their favoured issues.

So, why should a business:

a) Prioritise responsible tax conduct and tax transparency, and

b) Pursue Fair Tax Mark accreditation?

Today, we’ve released a new report which sets out seven magnificent reasons for a business to embrace responsible tax conduct, tax transparency and ultimately pursue the gold standard of Fair Tax Mark accreditation.

The report is jam-packed with supporting evidence and the testimonies of a number of our Fair Tax Mark accredited businesses. But even if independent third party accreditation is not your cup of tea, the report provides an excellent rationale for a business to embrace responsible tax conduct regardless.

Below is a brief synopsis of the seven magnificent reasons and the business case for Fair Tax Mark accreditation, but please see the full report for fully evidenced and referenced further details.

1) ‘Tax’ has come in from the cold and is a hot topic in the boardroom

Compared with other areas of corporate responsibility, responsible tax conduct has emerged as a priority relatively recently. Commitments and disclosures on tax significantly lag behind reporting on other sustainability issues (such as climate change and health and safety). But, change is now afoot. A recent survey of tax directors and tax managers from multinational companies around the world, revealed that: 40% say that in the last twelve months, the tax authority in their ultimate parent’s jurisdiction has become more rigorous in tax examinations; and, 75% expect stakeholder interest in the tax behaviour of large corporates to increase over the next three years. Analogous work among chief tax officers in the United States found that ‘ESG concerns’ were ranked the number one ‘threat’ to organizational growth ‘over the next few years’, ahead of regulatory changes, geopolitical fallout, supply-chain management, and global economic uncertainty.

The pressure for change has now reached a tipping point, and many boardrooms are feeling the heat. The Edelman Trust Barometer 2023 found in polling across 27 countries that more than three quarters (78%) of people across the world said that ‘CEOs are obligated to pay fair corporate taxes’.

2) For an “ESG” strategy to be credible, it must explicitly tackle ‘tax conduct’

Whatever your preferred framing (be it ESG or CSR or SRI or SDGs), for a corporate strategy to be credible, it must now robustly tackle ‘tax conduct’. Moreover, this strategy must be able to articulate that tax policy, governance and compliance are all evidential. The era of boiler-plate strategies and internal control statements is ending. Public discontent has grown to such a level that politicians the world over have been compelled to take action. An unprecedented re-consideration of the world’s one-hundred-year approach to international tax rules is now underway. In parallel, a number of credible, widely utilised voluntary responsible tax programmes have emerged around the world in recent years – such as the Fair Tax Mark, GRI 207 and the UN Principles for Responsible Investment.

Whatever their motivation, an expanding group of progressive businesses have recognised the shifting sands and built responsible tax conduct into their core strategy. They have raced ahead, lifted the lid on their tax contributions and now say what they pay with pride.

3) Responsible tax conduct resonates really well with customers and employees

In many parts of the world, there is a strong propensity to shop with and work for businesses that demonstrate responsible tax conduct – with support at levels that compares favourably to other ethical concerns. There is also a strong desire to see a celebration of those businesses that pay the right amount of tax, and who overtly shun the artificial use of tax havens and contrived tax avoidance practices. For example, in the United Kingdom, the vast majority (70%) of the public say that they would ‘rather shop with a business which can prove that it’s paying its fair share of tax’. In the United States, research among S&P 500 found that employee perceptions of managers and firms fall following tax avoidance news coverage, with firms in consumer-facing industries suffering the largest perception changes. Across the globe, the World Values Survey found that 62% of people say that ‘cheating on taxes’ is ‘never justifiable’ (with just 2.1% saying it was ‘always justifiable’).

As more and more businesses step up to the plate and embrace responsible tax conduct, the pressures on other business to follow suit will only increase.

4) In a low trust world, stakeholders value independent third-party verification

The Ipsos Global Trustworthiness Monitor reported in 2023 that less than a third of the global public trust business leaders to ‘tell the truth’ (30%) or ‘generally behave in an ethical way’ (29%). Against this background, corporate claims of responsible tax conduct can benefit from independent third-party assurance – in the same way as declarations on living wage payment, fair trade, organic production and sustainable forestry are supported by independent accreditation. Organisations rooted in civil society underpin the majority of the most trusted social and environmental accreditation schemes.

Fair Tax Mark accreditation satisfies the key reporting recommendations of GRI 207, the Principles for Responsible Investment (PRI) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, but carries with it the additional weight of independent third party verification undertaken by a trusted social enterprise. An increasing number of social enterprises view Fair Tax Mark accreditation as a valuable augmentation of their B Corp certification, given the latter does not systematically consider and rate tax conduct.

5) Investors will be assured that you are managing tax-related risks well

An increasing number of institutional investors and asset managers are now urging that multinationals should embrace responsible tax conduct and tax transparency as a core element of their ‘ESG’ credentials. This includes the world’s largest sovereign wealth fund, seven of Denmark’s biggest pension funds , the UK’s default auto enrolment pension scheme, the US’s largest public pension fund and many others. Investors are also increasingly viewing corporation tax avoidance as a ‘red flag’ for an overly aggressive attitude to compliance in general and poor corporate governance. Tax transparency has even recently been the subject of an increasing number of investor resolutions (witness the Annual General Meetings of Amazon, Cisco and Microsoft in 2022).

Corporate tax conduct is without doubt increasingly a mainstream material consideration of investors, and this will inevitably increase further still as tax rules are tightened across much of the world.

6) You will be well placed to get ahead of the curve of new legislation

Corporate tax rules are undergoing radical change across much of the world. Arguably, the race to the bottom is over. The question now is: how enlightened can corporate tax regulation become, and which countries will take the lead? Numerous governments (including Germany, Japan, South Korea, Switzerland and the UK) are now well on the way with implementing the OECD’s BEPS 2.0 Inclusive Framework proposals, including the introduction of a global minimum tax for business. Requirements for more corporate tax transparency are also slowly but surely grinding forward, with increasing legal requirements emerging across many parts of the globe. Across the European Union, public country-by-country reporting (pCbCR) will soon be mandatory for large multinationals with significant operations there. In April 2023, draft pCbCR legislation was published in Australia. This would, in the words of International Tax Review, usher in a “new era of tax transparency”.

Businesses that are Fair Tax Mark accredited are well placed to transition painlessly to a world where a step change in tax transparency is a mandatory requirement.

7) You will join a growing network of pioneers that are shaping a fairer and more productive future

Across the globe, close to 40% of multinational profits (US$970bn) are artificially shifted to tax havens each year, leading to a US$250bn reduction in corporate income tax revenue. Corporation tax is an important part of the tax contribution business makes in many parts the world. But, corporation tax has an importance way beyond the revenue it raises. In particular, it helps prevent the undue concentration of wealth and acts as an important backstop to personal income tax. Aggressive tax avoidance and evasion negatively distorts national economies and undermines the ability of businesses to compete fairly, both domestically and internationally. Tax evading corporate ‘cheats’ enjoy a potentially large implicit subsidy that allows them to stay in business despite low productivity. Productivity gaps between firms that comply with existing taxes and regulations and those which do not are significant, and these large gaps can translate into depressed economy-wide productivity and growth.

Fair Tax Mark businesses are proud to pay their fair share of tax and care about what they receive in return. Be that access to quality infrastructure, or a healthy and well educated workforce.


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