South Tyneside Council agrees to shun companies not paying their 'fair share' of tax

Council chiefs have backed a call to shun companies that avoid paying their ‘fair share’ of tax.

Friday, 26th February 2021, 6:28 pm
Updated Friday, 26th February 2021, 6:31 pm
South Tyneside Council has agreed to back the Fair Tax Mark campaign

South Tyneside Council has agreed to back the Fair Tax Mark campaign, which urges local authorities to only do business with firms committed to paying their fair share of tax.

Green Party councillor, David Francis, proposed the motion at a meeting of borough council on February 25, which was held via videolink and broadcast on YouTube.

“I’ll start by making a kind of a confession really in true support group style, my name is David Francis and I’m a happy taxpayer,” he said.

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“I’m a proud taxpayer, I’m proud to pay my fair share of taxes because taxation pays for so many of the things that benefit our communities.

“The last 12 months have seen us living through a time of national and international crisis and it’s at times like this that you really see the value of our public services, our NHS, our emergency services, teachers, armed forces, police. The list goes on and on and that’s just the tip of the iceberg.

“But all of those things rely on taxation and adequate funding so that they’re there when people need them.

“Councillors across the UK work hard to serve their local community and help direct the delivery of essential public services.

“By signing up to the councils for fair tax declaration, councils demonstrate their values and promote responsible tax conduct by leading by example on their own tax conduct, demanding greater transparency from suppliers and calling for more meaningful powers to tackle tax avoidance amongst suppliers when buying goods and services.”

The motion called for the council to ensure ‘not for profit’ arrangements were not being used “inappropriately as an artificial device” to avoid paying tax or business rates.

In addition, it called on the council to support calls for legal reforms to allow local authorities to “better penalise poor tax conduct and reward good tax conduct” through procurement policies.

Cllr Francis went on to say: “This is a question of who you choose to stand with.

“Do you choose to stand with the residents who rely on adequately funded services paid for by taxation?

“Or do we stand with those who try and do their best to take what they can from the system and seek to avoid paying their fair share.

“Please stand with me, with our public services and with our residents and vote for this motion.”

Independent councillor Glenn Thompson, who seconded the motion, said having a fair tax policy as a council would provide more transparency and help address an “imbalance on taxation between business and the working man.”

The motion was agreed verbally by full council without debate or the need for a vote.

South Tyneside Council Fair Tax Declaration in full.

Full council notes that:

:: The pressure on organisations to pay the right amount of tax in the right place at the right time has never been stronger.

:: Polling from the Institute for Business Ethics finds that “corporate tax avoidance” has, since 2013, been the clear number one concern of the British public when it comes to business conduct.

:: Almost two-thirds (63%) of the public agree that the Government and local councils should consider a company’s ethics and how they pay their tax as well as value for money and quality of service provided, when undertaking procurement.

:: Around 17.5% of public contracts in the UK have been won by companies with links to tax havens.

:: It has been conservatively estimated that losses from multinational profit-shifting (just one form of tax avoidance) could be costing the UK some £7bn per annum in lost corporation tax revenues.

:: The Fair Tax Mark offers a means for business to demonstrate good tax conduct and has been secured by organisations with a combined annual income of £50bn and more than 6,500 outlets and premises, including many social enterprises and co-operatives.

Full Council believes that:

:: Paying tax is often presented as a burden, but it shouldn’t be.

:: Tax enables us to provide services from education, health and social care, to flood defence, roads, policing and defence. It also helps to counter financial inequalities and rebalance distorted economies.

:: As recipients of significant public funding, local authorities should take the lead in the promotion of exemplary tax conduct; be that by ensuring contractors are paying their proper share of tax, or by refusing to go along with offshore tax dodging when buying land and property.

:: Where substantive stakes are held in private enterprises, then influence should be wielded to ensure that such businesses are exemplars of tax transparency and tax avoidance is shunned – e.g., no use of marketed schemes requiring disclosure under DOTAS regulations (Disclosure Of Tax Avoidance Schemes) or arrangements that might fall foul of the General Anti-Abuse Rule.

:: More action is needed, however, current law significantly restricts councils’ ability to either penalise poor tax conduct or reward good tax conduct, when buying goods or services.

:: UK cities, counties and towns can and should stand up for responsible tax conduct – doing what they can within existing frameworks and pledging to do more given the opportunity, as active supporters of international tax justice.

This Council resolves to:

:: Approve the Councils for Fair Tax Declaration.

:: Lead by example and demonstrate good practice in our tax conduct, right across our activities.

:: Ensure contractors implement IR35 robustly and pay a fair share of employment taxes.

:: Not use offshore vehicles for the direct purchase of land and property, especially where this leads to reduced payments of stamp duty.

:: Undertake due diligence to ensure that not-for-profit structures are not being used inappropriately as an artificial device to reduce the payment of tax and business rates

:: Demand clarity on the ultimate beneficial ownership of suppliers and their consolidated profit & loss position for procurements which involve a full tendering process.

:: Promote Fair Tax Mark certification for any business in which we have a significant stake and where corporation tax is due.

:: Support Fair Tax Week events in the area and celebrate the tax contribution made by responsible businesses who say what they pay with pride.

:: Support calls for urgent reform of EU and UK law to enable local authorities to better penalise poor tax conduct and reward good tax conduct through their procurement policies.