While we have long rated all companies on this, our rating was previously buried in the overall Anti-Social Finance column, alongside excessive directors pay and general financial corruption.
With the whopping bill for COVID-19 on the horizon, it is more important than ever for companies to be paying their way, so we decided to split out the column to make tax conduct more visible.
Our tax conduct rating is as follows:
(a) The company has no subsidiaries based in jurisdictions on Ethical Consumer's list of 43 tax havens.
(b) The company has the Fair Tax Mark.
(c) The company has comprehensive country-by-country tax reporting, a clear public statement confirming that it is company policy not to engage in tax avoidance activity nor to use tax havens for tax avoidance purposes, and provides a narrative explanation for what each entity in a tax haven is for and how it is not being used for purposes of tax minimisation.
The company has two or more non-high-risk subsidiaries which do not appear to be serving the local population and are registered in countries on our tax haven list. It does not have comprehensive public country-by-country reporting with narrative explanation as above.
The company’s UHC is registered in a tax haven to which it is not native, or it has two or more high-risk subsidiaries (see below) which do not appear to be serving the local population and are registered in countries on our current list of tax havens. It does not have comprehensive public country-by-country reporting with narrative explanation as above.
The company has everything required for a middle rating and also has reputable secondary criticism for tax avoidance. High-risk company types are:
- Ultimate Holding Company (UHC)
- Holding Companyl Trustl Nominee Company
- Limited Liability Partnership (LLP)
- Intellectual property company
- Internal finance company
- Insurance subsidiary
- Management services company.
Comprehensive country-by-country reporting
This consists of a full list of subsidiary companies stating the following:
- Place of incorporation
- Sales or turnover
- Net asset values or number of employees
- Tax paid
Some companies, such as financial companies, are required by law to report this, but often ‘forget’ to include one or two key subsidiaries in the list (those located in Jersey, the Cayman Islands, etc).