Businesses face the risk of seriously damaging their reputation if they do not make tax planning part of their corporate responsibility programmes, says anti-poverty charity ActionAid.
Today, alongside other campaign groups ActionAid will launch a report on how companies can proactively commit to ‘Tax Responsibility’. Speaking at the Oxford Centre for Business Taxation’s annual conference Martin Hearson, ActionAid’s tax policy advisor will warn that a failure to respond will leave businesses open to reputational risk.
Martin Hearson said: “So far businesses have reacted to criticism of their tax avoidance by denying any responsibility. This is exactly how the fashion industry reacted when claims of ‘sweatshop’ abuses emerged in the 1990s. Just as fashion companies who failed to take these allegations seriously incurred major reputation damage, so businesses accused of tax avoidance need to respond with more than reflex denials.”
The group’s briefing argues that ‘tax responsibility’ must take into account three key insights:
1. Compliance with the letter of the law is no longer sufficient to protect business from the risks associated with tax planning
3. Lack of transparency around tax planning leads to increased risk
2. The structures and practices of tax planning are at the heart of tax responsibility, rather than the amount of tax paid, which is an outcome of these practices.
At the end of last month, African tax authorities met specifically to discuss its allegations made by campaigners that brewing company SABMiller avoided millions of pounds of tax in Africa. Continued denial from multinational companies will embolden campaigners to seek out further examples, as well as increasing the risk that businesses’ tax avoidance schemes in Africa will be audited.