Motion proposed by Councillor Philip Morton

Standing up for Responsible Tax Conduct

This model motion is provided by the Fair Tax Campaign which is encouraging all councils to support their Fair Tax declaration.

Full Council notes that:

1.               Around 17.5% of public contracts in the UK have been won by companies with links to tax havens. (Source https://datlab.eu/blog/eu-tenders-to-tax-havens/

2       It has been conservatively estimated that losses from multinational profit-shifting (just one form of tax avoidance) could be costing the UK some £7bn per annum in lost corporation tax revenues.

Source https://missingprofits.world/

3.               The Fair Tax Mark offers a means for business to demonstrate good tax conduct and has been secured by organisations with a combined annual income of £50bn and more than 6,500 outlets and premises, including many social enterprises and co-operatives.

Full Council believes that:

1.           As recipients of significant public funding, local authorities should take the lead in the promotion of exemplary tax conduct; be that by ensuring contractors are paying their proper share of tax, or by refusing to go along with offshore tax dodging when buying land and property.

2.           Where substantive stakes are held in private enterprises, then influence should be wielded to ensure that such businesses are exemplars of tax transparency and tax avoidance is shunned - e.g., no use of marketed schemes requiring disclosure under DOTAS regulations (Disclosure of Tax Avoidance Schemes) or arrangements that might fall foul of the General Anti-Abuse Rule.

3.           More action is needed, however current law significantly restricts councils’ ability to either penalise poor tax conduct or reward good tax conduct, when buying goods or services.

4.           UK cities, counties and towns can and should stand up for responsible tax conduct -doing what they can within existing frameworks and pledging to do more given the opportunity, as active supporters of international tax justice.

Full Council resolves to:

1. Approve the Councils for Fair Tax Declaration.

2. Lead by example and demonstrate good practice in our tax conduct, right across our activities.

3. Include in council standard terms and conditions. Ensure contractors implement IR35 robustly and pay a fair share of employment taxes.

4. The Council will not use offshore vehicles for the purchase of land and property, especially where this leads to reduced payments of stamp duty.

5.Undertake due diligence to ensure that not-for-profit structures are not being used inappropriately as an artificial device to reduce the payment of tax and business rates.

6. Demand clarity on the ultimate beneficial ownership of suppliers and their consolidated profit & loss position.

7. Promote Fair Tax Mark certification for any business in which we have a significant stake and where corporation tax is due.

8. Support calls for urgent reform of UK law to enable local authorities to better penalise poor tax conduct and reward good tax conduct through their procurement policies.

In accordance with the Constitution, Councillor Morton was given the opportunity to
explain the reasoning behind his Notice of Motion.

Firstly, Councillor Morton thanked the Officers who helped prepare what was a modified but hopefully practical version of the Fair Tax declaration.  Paying tax was often presented as a burden but should not be especially by recipients of public funding. Tax helped pay for a huge array of critical public services such as policing, defence, education, health, social care and much more.  The fair tax mark provides a way to demonstrate good tax conduct to residents and inform suppliers of the standards that were expected from them. 

He proposed that Full Council noted that around 17.5% of public contracts in the UK had been won by companies with links to tax havens and losses from multi-international profit shifting could be costing the UK in the region of £7billion per annum in lost revenue.   This Fair Tax mark then offered the means for businesses to demonstrate good tax conduct and had been secured by organisations with a combined annual income of £50billion and more than 6,500 outlets.

He felt that the proposal should really be that Full Council resolves to approve the Council’s Fair Tax declaration, to lead by example and demonstrate good practice in its tax conduct across all activities and ensure that contractors implement an IR35 robustly to pay a fair share of employment taxes.

Also, he felt that this Council should not use offshore vehicles for the purchase of land and property particularly where this leads to reduced payments of stamp duty, and undertake due diligence to ensure that not for profits structures were not being used inappropriately.

This Council should demand clarity on ultimate beneficial ownership of suppliers and their consolidated profit and loss position and promote Fair Tax mark for any business that this Council had any significant stake and where corporation tax was due. Also, calls for urgent reform should be supported to enable local authorities to better penalise poor tax conduct  and reward good tax conduct through its procurement policies.

This would go towards demonstrating to residents the equality and fairness of the system that he felt was vital to the Council’s democratic structures.  

Councillor Dowling seconded the proposal.  She stated that the size of the global economy had quadrupled over the past 30 years, yet the gap between rich and poor was getting wider with a massive increase in wealth at the top, whilst the total wealth owned by those at the bottom was failing.  Since 2015, the richest 1% have more wealth than the rest of the world combined and such extreme economic inequality was fuelled by an epidemic of tax evasion and avoidance that had reached an unprecedented scale.  Whilst millions across the world lived in poverty, rich individuals and companies exploiting the secrecy in terms of tax havens continued to avoid paying their taxes preventing better services being provided.

Since 2014, a large number of documents have been leaked unveiling how tax evasion and avoidance have become standard business practice across the globe. Through a complex and usually regulated tax system multi-national companies and rich individuals actively seek to increase their profits by storing them offshore and avoid   

paying taxes in their countries. Tax havens were the heart of this system, they allowed massive amounts of wealth to flow untaxed and in secret.  Those who should be paying the most tax instead maximise their profits in part by paying as little tax as possible. Tax evasions deprived governments with the money they needed to provide vital public services and infrastructure.  Governments have to cut back on these services or make up the shortfall by collecting higher taxes from everyone else - both options saw the poorest people lose out and the inequality gap continued to grow.  Inequality needs to end and world leaders, governments and councils needed to be called upon to end the era of tax havens.   Councillor Dowling urged Members to support this Motion for Fair Tax declaration.

Councillor Atterwill stated that whilst he supported the principle of this Motion, the third resolution and the way it had been worded was a concern and he asked Councillor Morton how the Council could ensure that contractors implemented IR35 and paid their fair share of employment taxes, and what was considered fair.  He felt that this proposed recommendation should be worded differently by removing the words ‘fair share’ and replacing with ‘and pay legally obligated employment taxes’.  He felt that ‘fair’ was a subjective term and would be interested to hear the Council’s Solicitor thoughts on this matter and whether this stood up on any contract that the Council awarded to third parties. 

Rob Walker, the Deputy Chief Executive & Monitoring Officer appreciated what Councillor Atterwill had asked Councillor Morton but under the Constitution it stated that Councillor Morton could only speak again on the Motion as a right to reply at the end of the debate. He would be happy to offer discretion if Members of this Council saw fit whereby Councillor Morton was able to take a series of questions or have more of a debate.

Councillor Atterwill still wanted to hear the Council’s Solicitor’s opinion.

Councillor Borrett stated that these papers had been made available to Members beforehand where any questions of a technical nature could have been satisfied prior to this meeting.  This was in fact a debate to the merits of this Motion and therefore he suggested that Members should adhere to the Constitution, and if there was a proposal to alter the Motion in any way then Councillor Atterwill had every right to make such a proposal that would have to be seconded and voted upon.

In response, the Deputy Chief Executive & Monitoring Officer explained that it was clear in the Constitution that the proposer of the Motion had a right of reply at the end of the debate.  However, during previous meetings there had been a frustration with this element of the Constitution as it prohibited debate. 

Councillor Cowen stated that as a Council it did lobby through the Local Government Association, Central Government and HMRC and other agencies to ensure that all companies, particularly those who the Council undertook business with, complied in full with the requirements of the law of this land. It could loom at the Fair Tax mark but the advice received was as follows; that this Council could probably receive challenges because suppliers could easily argue that they did comply with the law, tax avoidance was not illegal but tax evasion however, was a fundamentally different topic and this Council would look very carefully at those who fell under that equation but the Council could not compel or require people with whom it did business to work other than within the law of this country.   The Council did have a right to include social, environmental and ethical considerations in its procurement strategy and it did, but he asked Members to remember that the Fair Tax Mark scheme was a voluntary scheme and suppliers of all sizes had no legal obligation to comply with this voluntary scheme although many already did. 

Councillor Cowen felt it important to recognise that should this Council incorporate this Fair Tax scheme; it would potentially lead to fewer suppliers submitting bids particularly if it was made a mandatory requirement.  In conclusion, this Council had a duty to residents that value for money was provided at all levels at all times for the services that this Council supplied to them. Councillor Cowen then suggested to Councillor Morton that no changes should be made to the Council’s activities.

The Deputy Chief Executive & Monitoring Officer reminded Members that according to the Constitution Members were only allowed to speak once apart from the mover of the Motion.

The Leader had a number of questions for the proposer and the seconder of this Motion. Firstly, did they both seek advice from Officers of this Council around the legality of this Motion and whether this Council was able to implement it.  Secondly, had advice been sought from Senior Officers of this Council around the existing processes in respect of contracts.  Also, had they understood the ability and extra resource it would take to enable this form of policy within the Council and whether advice had been sought as to what other councils did and whether they had been able to implement this successfully bearing in mind that this Fair Tax scheme came into effect in 2014.

Councillor Jermy stated that Councillor Cowen and the Leader had referred to the advice that had been received and asked if it could be confirmed as to whether such advice had been provided to the Conservative Group and if it had it was a constitutional requirement for such information to be provided to the other remaining Groups.

Councillor Cowen advised that the advice received had been provided to him alone in response to his enquiries.

This was a debate on a Motion and Councillor Borrett had listened to Councillor Dowling quite impassioned speech and accepted where she was coming from; however, he could not support all what had been contained in the Motion and would be voting against it one of which was the extra burden that would be put on this Council.  He had noted that Councillor Dowling had said in her speech that companies were dodging taxes without breaking any laws and he believed it was not the business of Breckland to be policing peoples’ tax, this was for national government and HMRC.  If this Council was to step outside the normal procurement process, the only outcome for that would be increased expense for the residents of Breckland and would lead to ordinary citizens footing the bill and that would happen. It would also probably lead to less tenders for work and a huge amount of work and staff would be necessary to investigate fully every single company that this Council had dealings with. All of which would have to paid by the tax payer. He accepted the total integrity of this matter but felt that it would be unworkable and unfair to increase the Council Tax for policing something that was already being done elsewhere. 

Councillor Land asked if the Council’s solicitors had looked into this issue and provided advice, and if so, could Members be informed of their opinion.  

Sarah Wolstenholme-Smy, the Council’s Legal Services Manager, said that she had not been involved in the discussions in respect of this Motion.    

Councillor Birt felt that it was being portrayed as being difficult for this Council to pursue, but this was not the case, all that was being put forward was that companies that subscribed to this scheme would be preferred.  There could be fewer tenders but that could mean that such companies did not actively want to subscribe to this scheme. He felt it was important not to penalise good law-abiding businesses who took their morale obligations seriously, and this Motion was an ideal way to show them that they had the Council’s support.

From a Point of Order, the Leader from the Council’s position, was concerned that the Member in question had just insinuated that providers of the Council’s services to residents and businesses were undertaking illegal activity and as had already been mentioned, tax avoidance was not illegal, tax evasion was. He asked for advice from the Solicitor about the accusations made to this Council and acting illegally.

The Legal Services Manager did not consider that an accusation had been made, she believed it to be just a comment.

The Leader raised another Point of Order and wanted clarity that all services provided to residents and businesses across the district were contracts that were procured legally within the law.

The Deputy Chief Executive & Monitoring Officer did not believe that the comments made by Councillor Birt were accusing the Council of any wrongdoing, all had been recorded and he asked for the matter to be moved on. 

Councillor Morton then provided responses to the many questions that had been asked but still agreed with the Motion and recommendations that had he had put forward.

A vote on the Motion was then taken.

The Motion was lost by 30 votes against and 8 votes in favour, plus 2 abstentions. 

Councillor Birt asked for his vote in support of the Motion to be recorded.