Members of UK200Group comment on Labour’s proposal for a ‘good business’ kite-mark
Members of the UK200Group of independent accountancy and law firms have commented on the shadow chancellor’s proposal to introduce a ‘good business’ kite-mark.
In a speech to the London Chamber of Commerce, shadow chancellor John McDonnell said that Labour would introduce a kite-mark for businesses that pay their taxes on time and pay “decent” wages.
Addressing the chamber, he said:
“We know a small number fail the rest of us. The tax dodgers, wriggling out of making the fair contribution the rest of us make, the underpayers, ducking their responsibilities to their own employees and failing to pay a wage anyone can live on.”
Duncan Montgomery, tax partner at UK200Group member firm Whittingham Riddell, said:
“A kite-mark for businesses that pay their tax on time would result in an excessive burden of administration on an already stretched HM Revenue & Customs (HMRC).
“If it ever came to pass, one mistake in removing the kite-mark could in theory flatten a business.
“A far more sensible system would be to introduce a UK AMT – Alternative Minimum Tax – that ensures big business pays its fair share, and the international companies that flout the system for best effect still pay enough. The US uses this system very effectively and it keeps government cashflow up.”
Andrew Jackson, head of tax at UK200Group firm Fiander Tovell LLP, said:
“A kite-mark already exists – the Fair Tax Mark. It’s been around for nearly two years, but has only had around 15 firms sign up to it. There has been a bit of publicity about it, and it was even debated in Parliament when it came in, but it’s not really having much of an impact – as evidenced by the fact that John McDonnell didn’t mention it, I suppose.
“I believe that a year or so ago there was an opportunity for 25 small businesses to get the Fair Tax Mark, without paying the usual fee. It may be that they are still in the assessment process, but if businesses aren’t taking it up even if it’s free, it suggests that there isn’t much appetite for a kite-mark at the moment.
“One problem may be that the Fair Tax Mark doesn’t actually look at whether the tax paid is ‘fair’ – the criteria are more about explaining why the tax paid is at the level it is, and they don’t address whether that level seems like a fair rate or not. However, I’m not sure that consumers look that far into the detail.
“The overall problem with setting up any sort of kite-mark is that ‘the fair amount of tax’ is such a subjective area. Without a firm definition of what is ‘fair’, it all falls down: people will disagree about whether any given business deserves the mark.
“Even with a definition of fair, there are two possible outcomes: either the threshold is low (you haven’t been convicted of material evasion), in which case the kite-mark is meaningless; or it is relatively high, in which case subjectivity comes in to play and the mark gets mired in controversy. When even claiming R&D tax relief or capital allowances (or making a loss) can be flagged as ‘avoidance’, then clearly a threshold which I would consider far too high is not high enough for some people.
“I suspect that the Fair Tax Mark retreated to objective issues such as disclosure in order to avoid this potential controversy.
“So the first thing to do would be to have a clear definition of what is ‘fair’ in tax and what is not. Only then can we think sensibly about holding people up to that standard.”