‘How Labour and Co-operative councils are taking a stand on tax avoidance’

This week is Fair Tax Week 2023, where businesses and organisations around the UK highlight the importance of responsible tax conduct and promote the end of tax avoidance.

Responsible tax conduct is fundamental to the public services we all rely on, whether that’s funding our schools, building new hospitals or cleaning our streets. The next Labour & Co-operative government will need to confront international tax avoidance head on – working with international partners to reduce its damaging effect.

Already, we have seen the start of a new fair tax movement, including the introduction of a global minimum corporate tax. But there’s also potential to tackle this global problem on a local scale too, as a growing number of local councils have joined the call for greater powers to clamp down on the issue at home and abroad.

Labour & Co-operative councillors are at the forefront of the fight for a fairer tax system. Together with the Fair Tax Foundation, we’ve been encouraging our councillors to stand against tax avoidance and sign up to the Fair Tax Declaration. From Edinburgh to Torfaen, 49 local authorities are now committed to responsible tax conduct in all their operations as well as encouraging greater transparency within their supply chain and procurement networks.

Fair Tax councils, such as Torfaen, have begun efforts to encourage their providers to get Fair Tax accredited, as well as raising awareness of the Fair Tax Declaration to other councils. Fair Tax Councils now work to ensure all purchases of property and land by the council directly or in partnership do not use offshore vehicles that avoid tax.

Greater attention is paid to the legitimacy of not-for-profit structures used by suppliers, which can sometimes be implemented fraudulently to avoid business taxes. An enhanced requirement for transparency has been introduced, which aims to identify the ultimate beneficial owners of suppliers – many of whom set up offshore or overseas to avoid paying their fair share.

The Declaration enables local councils to take the first steps in creating a level playing field between ethically taxed providers and those linked to tax havens. For too long, tax haven linked businesses have been winning public contracts by undercutting their competition – with approximately 17.5% of the UK’s £300m annual procurement spending going to tax haven-based businesses.

The Fair Tax Declaration calls for a change to public procurement rules, which would give local councils greater powers to penalise poor tax conduct and award contracts based on social value, rather than purely value for money.

This change would help to foster greater involvement of social enterprise, co-operative and SME providers, which are regularly undercut by tax haven linked competitors. Providers from the social economy sector are closely linked to their community, providing both good jobs and social value to the communities they serve.

Co-operatives and social enterprises have been early pioneers of the Fair Tax Mark, with many of the UK’s leading co-operatives being Fair Tax Mark accredited, including the Co-op Group, Midcounties Co-op and East of England Co-op.

It is clear the public support action against tax avoidance, with 66% of people agreeing the Government and local councils should consider a company’s ethics and how they pay their tax when awarding contracts to companies.

An incoming Labour & Co-operative government should commit to making changes to public procurement at a national level, which would establish social value and ethical tax conduct as a key consideration when awarding contracts.

Efforts to increase transparency of beneficial ownership and greater resources for Companies House will further help to identify businesses engaged in tax avoidance – strengthening the hand of both local and central government in its efforts to promote responsible tax conduct amongst suppliers. This should be accompanied by ongoing support for international efforts to reduce tax avoidance and the shifting of profits to tax havens globally.

We must take further action on tax avoidance. Our future public services rely on a solid tax revenue, which enables us to invest in the health, education, and wellbeing of current and generations to come.

The next Labour & Co-operative government should continue these efforts to ensure public procurement promotes fair tax, ends London’s status as a dirty money capital, and works to build an international fair tax system. To find out how you can get involved and campaign for fair tax, visit Fair Tax Week 2023.