Examining tax Article icon

Examining

Few issues are so divisive as taxation. General elections are won and lost over it; governments constantly change it and newspapers love stories about who is not paying enough or none at all.

All this makes tax a minefield for companies and the firms advising them, particularly when devising tax avoidance strategies.

Fund managers with offshore trusts, banks with overseas accounts and foreign companies with operations in the UK all get brought before the court of public opinion. The judgments are usually highly subjective, volatile and emotive.

Amidst all this noise, is it actually possible to have a reasoned, open forum on the subject where parties with differing views can air them without the air turning blue with invective?

Responsible Tax for the Common Good is an attempt to do precisely that. Curated by think tank CoVi and supported and sponsored in the UK by chartered accountants KPMG, this project seeks to explore the meaning and purpose of tax for the benefit of all and what responsible tax behaviour looks like.

It launched last October as a consultation project focused on tax advice, inviting stakeholders ranging from taxpayers to academics, journalists, government officials, politicians, non-government organisations (NGOs) and KPMG’s clients to inform its thinking.

However, Robert Phillips, former chief executive at public relations group Edelman who now runs consultancy Jericho Chambers, a strategic adviser to KPMG, says the initiative goes back 12 months earlier to a conversation with Jane McCormick, a KPMG senior tax partner.

The conversation was about ‘why their communications were failing them and why they were constantly in the firing range with regards to tax’, he recalls.

‘I felt that they weren’t fully engaged with all the people that need to understand not just what the purpose of tax is but the purpose of tax advice. They were so busy trying to deal with all that was oncoming that they never had the chance to make the case that tax is actually a good thing and why it’s important to society. The bottom line is that without tax you don’t have roads, hospitals and schools.’

Phillips, author of Trust Me, PR is Dead, believes trust can only be built through actions, not words, and that organisations wishing to be seen as trustworthy need to make themselves vulnerable to stakeholders.

His advice hit a chord with KPMG, which formed a working group of 14 partners to define the purpose of tax and its role within that. After three months, the group arrived on the notion of ‘responsible tax advice for the common good’. The next step was to create a community of stakeholders and host conversations about tax online.

‘It was very much about welcoming different voices and dissenting voices into the conversation and then having a very different kind of engagement with adult conversation about the purpose of tax,’ says Phillips.

The initiative made a deliberate effort to include vocal tax critics like Labour politician Margaret Hodge, anti-poverty campaigner Richard Murphy, the Tax Justice Network, Action Aid and Christian Aid alongside executives from major companies, politicians and Her Majesty’s Customs & Excise.

It created a web platform at www.responsibletax.org.uk and began as a community of about 100 stakeholders but rapidly almost doubled in size and supported its online efforts with events and discussions.

Now the web platform is being viewed by thousands of people and hosting conversations ranging from Swiss private bank account scandals to devolution and localism in Scotland.

‘It’s completely organic and very uncontrolled,’ says Phillips. ‘We ran an event with [former Archbishop of Canterbury] Rowan Williams talking about faith and trust in business and its relationship to tax.

‘It was attended by imams, rabbis and leading members of the Catholic church. We’ve also looked at the moral dimensions of tax, international competitiveness of tax and the transparency in tax and brought in lots of different voices to try to explore this common space, filming and writing about it and recording all the outputs on the web platform.’

McCormick stresses that Responsible Tax for the Common Good is in no way a public relations exercise. ‘In large part, it was driven by a frustration with the way in which the tax debate was happening,’ she says. ‘At its heart were several groups of people with very similar aspirations for the tax system – for it to operate fairly, support the things civil society wants, such as schools and hospitals, and not to stifle economic growth.

'But these different stakeholders, ourselves included, weren’t really talking to one another in an adult-to-adult fashion. We felt that much of the rather heated debate going on in tax from activists, politicians and the corporate world was like people standing on mountain tops shouting at one another through megaphones.

‘No-one heard what the other said. No one really listened. That’s why we wanted to change the dynamic. What we really wanted to do was help create a space where there could be a meaningful, constructive and candid dialogue between as wide a range of stakeholders as possible. The success of this is about the fact that all those people who you would not expect to be talking to each other are now talking to each other.’

The stakes of such an approach are clearly very high indeed. Though KPMG brought in CoVi as an independent moderator, it was concerned about the potential for negative tactics and unhelpful dialogue on the website.

‘We felt that, although we had our own views on the debate, we really needed to take time to listen to other opinions and consider our own position in light of alternative viewpoints,’ she adds.

‘At the beginning we were a bit nervous. We were a little worried that some stakeholders might be cynical and unwilling to participate and that the very offer of engagement might result in negative comments. But we found that there was a quickly a mutuality of trust and respect – real reciprocal vulnerability – operating.’

‘The many and varied participants in this process may never reach unilateral agreement on all aspects of the debate but there are areas of common ground and by focusing on the similarities rather than the differences and leaving plenty of space for divergence of opinion, we seem to be able to move forward constructively.’

Having been surprised by how quickly the initiative has gained momentum, KPMG is now discussing where it should go next. Partners in other KPMG practices have expressed interest and may do something similar in their own territories, while the working group of partners has to decide how far to take it in the UK.

‘It’s a question we’ve been grappling with ourselves to be honest. Beyond the UK seems a given,’ admits McCormick. ‘We’ve had lots of interest from colleagues and clients overseas in supporting similar projects. It’s also very much the case that many of the issues that are at the heart of the problems with the tax system relate to how the international tax system works so there is a very strong global aspect to this.

‘We will soon be extending the programme to the European Union and the Organisation for Economic Co-operation and Development, for example.

‘Pinning down where we might go in terms of concrete outcomes is harder. We’re not going to solve every issue with international tax. Neither are we setting out to ‘win’ any arguments.

‘There’s also a tension between stakeholders in the group wanting to reach a consensus on solutions in some areas and other stakeholders who need to maintain their independent stance on the issues.

Maybe a blend is possible where we can use the forum that has been created through this project as a testing ground for ideas and perhaps reach a varying level of consensus depending on the issue. There’s no easy or single answer, just an ongoing constructive dialogue between stakeholders.’

Chris Morgan, KPMG’s head of tax policy in the UK, also believes the project has made real achievements. ‘By talking to each other, we can each have a better insight into each other’s points of view and thus have a stronger mutual understanding of one another,’ he says. ‘Some of the conversations we have been having across the stakeholder group have been informative and inspiring in equal measure.

‘We are all finding much, and sometimes new, common ground. It’s a long, long way from ‘old normal’ forms of corporate communications.’

Phillips, meanwhile, believes a similar approach can also be used to build consensus on other seemingly intractable issues, including banking, affordable housing and fossil fuels. ‘The future can’t be imposed,’ he says. ‘It can only be negotiated.’