Like the proverbial bad penny, it’s back. The Fair Tax Mark mark 2 was relaunched on a reluctant world this morning, to much trumpeting.
So, the question is: has it improved?
Well, there are some definite improvements to be welcomed. Firstly, the inscrutable 15 point scale from the original FTM, under which you were awarded - against your will if necessary - a Green, Amber or Red Tax Mark, has been scrapped. Now you either get the Fair Tax Mark, and can wear it on your website, or you don’t. But companies that don’t get the Fair Tax Mark now won’t get pilloried for actively not getting it. This should encourage companies to think of the Fair Tax Mark as something to aspire towards rather than something to avoid completely.
And it’s good to see some real experts advising the FTM. I don’t always get along with David Quentin or Andrew Cobham. That’s not surprising, given that our politics are so diametrically opposed. But they know their stuff, and they’re exactly the sort of professionals a venture of this sort needs. Not the amateurish have-a-go zero antics of Richard Murphy (although he has been retained as its technical director - ugh - and “founder”).
However problems remain.
Fair Tax Mark is only as good as people’s trust in it. And the profoundly dishonest and grubby fingerprints of Richard Murphy still stain this project. So today’s announcement is presented as a “launch” of the Fair Tax Mark and last July’s Murphyshambles is now described as a “pilot study”. But this is a blatant lie. Last July was the launch, and it completely failed due to shoddy design, shoddy research, inadequate consultation and Richard’s trademark failure to engage with critics. Given that FTM expects businesses to be transparent about their taxes, it’s the very least it can do to be honest about its own difficult birth. There are further transparency problems over the organisation itself. What is its business structure? The old FTM was a company limited by guarantee, run out of Murphy’s mansion in Norfolk. Now the contact address is in Manchester. But what’s its funding? Who owns it? When can we see its accounts? The FTM is very coy on these issues, and that’s simply not good enough. As stands, it would score a big fat zero under its own criteria.
There are also the distasteful echoes of the worst abuses of indulgences. So companies pay FTM to be absolved by FTM. Yes, there’s a methodology, but it has some of the same wiggle room that allows FTM to reward its friends and smite its enemies. We don’t know how the three plucky FTM pioneers - Unity Trust Bank, Midcounties Coop and The Phone Coop - got their FTM. We just know that they paid an undisclosed sum of money to FTM and they got it. In this context, it’s particularly unfortunate that the Guardian’s recent roundtable on FTM was funded by the Midcounties Co-op. It rather stinks of “you scratch my back, and I’ll scratch yours”.
And it’s a pity that they’ve scoped multinationals out of the initial methodology. While there are good reasons for doing this, it allows the myth to remain that multinational companies are all vicious tax avoiders while small independent companies are pure as the driven snow. In practice, the situation is more complex. By focusing solely on corporation tax, which is almost all paid by the largest companies, it overlooks the other forms of taxes paid by companies and the other benefits they bring to society, most of which accrue to us, not their owners.
There are some niggles in the precise criteria too. The criteria reward companies that provide a reconciliation to current tax, even though FRS 102 (29.27(b)) requires a reconciliation to total (current plus deferred) tax. It’s true that not every company provides clear disclosures in their tax reconciliation, but it seems mean to require something that adds further clutter to local GAAP. The example notes, while welcome, look absurdly long for a small company.
Naturally, the proof of whether FTM will ultimately be successful will be in whether companies want it. And there are plenty of smaller companies who feel preyed upon by big multinationals who might think a couple of hundred quid is a price worth paying to be able to show a banner in their window. But it’s not clear that such parasitical behaviour will prove to be in these companies’ interest or even in the public interest.