Tax transparency - what is fair tax?
March 12, 2014
Momentum continues to build around tax transparency. We're seeing more and more companies voluntarily providing clearer information on their tax affairs, and this can only be a good thing. But transparency means different things to different people - and the crucial questions should always be who is this for and for what purpose. Perhaps the biggest challenge is in providing relevant and understandable information to the public. One recent development is the Fair Tax Mark. It's being positioned as a tax equivalent of Fair Trade, a badge that will show consumers immediately if a company has paid a 'fair' amount of tax. It's an interesting idea and on the face of it we can see the appeal.
However while we welcome initiatives that encourage voluntary transparency and clarity in tax reporting, we are concerned that the Fair Tax Mark doesn't give a complete picture. Tax transparency must consider the whole story around tax. For example, The Fair Tax Mark focuses solely on corporation tax, when our research shows that most businesses now pay more than twice as much in other taxes.
Moreover, what is the right or fair amount of tax is something that is entirely dependent on the facts and circumstances of each business, and it is near impossible to have a meaningful one size fits all measure that can be used generically across a wide variety of businesses based solely on publicly available information. Measuring good transparency (as opposed to fair tax) based on a set of best principles criteria is different - this is what our Building Public Trust Awards approach seeks to do and there are elements of the Fair Tax Mark approach that seek to do the same. What we think is dangerous is the assertion of "Fair (or unfair)Tax.
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