Are corporations paying their fair share of tax?

Tax avoidance has been a recurrent theme of the UK news cycle over the last few years.

Corporations such as Amazon, eBay, Starbucks and Apple have been heavily criticised by governments and the public alike for engaging in complex off-shore schemes which reduce their tax bill to a fraction of profits. For example in 2015 Amazon is reported to have paid just £11.9m in tax on sales worth £5.3bn whilst earlier this year the Panama Papers, implicated world leaders and senior politicians in an elaborate tax avoidance scheme.

On a local level, tax avoidance schemes have become popular among UK businesses and even celebrities. For example Take That frontman Gary Barlow and comedian Jimmy Carr have both been shamed by the UK press for engaging with aggressive tax avoidance schemes. OBE Gary Barlow was deemed to have used a scheme that was an “abuse of the system” and was ordered to pay back millions, whilst Jimmy Carr who used the now defunct K2 system is reported to have paid back around £500,000 to HMRC. K2 has since closed down but alternatives have sprung up in their place and they’re not just available to the rich and famous. In September 2015 HMRC used new legislation, originally aimed at wealthy investors to crack down on freelance workers earning between £60,000 to £80,000.

But things are gradually changing and ethical tax practice is on the rise. Damion Viney’s firm – Crunchers was the first accounting service in the UK to get the Fair Tax Mark. The Fair Tax Mark is a way for businesses to tell their customers that they are paying the full rate of tax. He believes it’s a sign things are changing for the better. “Ten years ago, it was almost the duty of a business owner to find every which way to avoid the last penny in tax,” he says. “Now, it’s more like: ‘We’ll pay our tax; we understand that’s part of life.” Paul Bulpitt, founder of The Wow Company says his staff are also ethically driven: “They wouldn’t be with us today if they thought we were dodgy. That kind of purpose-centered business model is more of an expectation now.” Entrepreneur and CEO of Zealous  – Guy Armitage – believes being ethical is, to an extent, a luxury: “If someone can’t afford to buy a coffee from a shop that’s a bit more expensive than a brand that’s less ethical, they’ll go to the people who will sell them a cheaper coffee.” However, he admits that there is a better business case for being ethical than ever before: “It’s part of the sales strategy.”

Until 2015 Google’s motto was “don’t be evil” and it’s not fanciful to think the widespread fury at their failure to comply with the spirit and ethos of the taxation system played a role in retiring this slogan. With a turnover of $74bn (£59bn) it’s hard to imagine Google is considering ethics when making its tax arrangements. But just as seals of approval such as Fairtrade and The Rainforest Alliance have become sought after badges for ethical consumers, it’s feasible to imagine that we could soon see stamps like The Fair Tax mark adding value to products and services and may play a role in the future of our big corporations too.

Since the Panama Papers story broke, just 22 people in the UK have been placed under investigation for tax avoidance, however each new news story that breaks about corporate tax avoidance lowers the credibility of big businesses who talk about ethics but fail to act. I predict that ethics will become a defining factor in the brand management of big businesses and prominent individuals over the coming years and tax will have an enormous role to play.

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