Helsinki City Council turns to the Fair Tax Mark
A new initiative to stop tax dodgers winning public contracts
Leonie Nimmo reports back from Helsinki
In Scandinavian social justice activist circles, Helsinki City Councillor Thomas Wallgren looms large. I visited Finland last week at his invitation, to talk to politicians and campaigners about the opportunities that the Fair Tax Mark presents for public procurement.
Tax avoidance by companies winning public sector contracts is a particularly insulting aspect of the massive global problem of corporate tax avoidance. But according to Thomas, it presents an opportunity to address a global problem locally. “With the big issues like tax avoidance, you need engagement at all levels: locally, nationally and internationally,” he says. “How can cities take responsibility?”
Thomas has pushed Helsinki City Council into being one of the most progressive local councils in the world on this issue. In 2012 it passed a resolution to avoid doing business with companies with links to tax havens. But the issue is not straightforward.
European member states and their municipalities must follow the European Directives that govern public procurement, which are designed to enshrine fair competition. As such they uphold the central tenet of the single European market. They do not, however, do a lot else. Local authorities risk substantial financial penalties if they fall foul of procurement regulations and are notoriously risk averse.
In 2013 a report by Helsinki Council's legal services concluded that the issues belonged to central government. The City's hands appeared to be tied. Since then Thomas and others have sought to find a way around the problem, but for others in the Council the matter appeared to be closed.
Using the Fair Tax Mark in procurement
I met with the Green Party and Christian Democrats in party meetings that preceded the full City Council meeting last week. It was a busy time in the Finnish political calendar: national elections are being held on the 19th April. Nevertheless there was a willingness to discuss the issue and interest in the new way of approaching the problem which I was presenting: the use of a Fair Tax Mark.
The 2014 version of the European Directives explicitly allow for the use of ethical labels if certain conditions are met. But the labels must be applied to the product or service being purchased. This would mean the Fair Tax Mark as it currently exists (accredited to a company) would not be compliant. More work needs to be done to develop a product-based Fair Tax label. This will require legal guidance along the way.
A pan-European Task Force
We know that there is interest across Europe in fixing the problem of government contractors avoiding tax, particularly in the Nordic countries. Last year I visited Stockholm for the launch of the Tax Haven Free Cities and Local Governments initiative, which has gathered signatures from the UK, France and Spain as well as Sweden, Finland, Norway and Denmark.
We need to find a solution to this critical problem on behalf of all European states and municipalities. Thomas is keen to establish a pan-European task force. Watch this space.