Tax is an attitude: not just a set of rules

Alistair Phillips-Davies General, Private sector, Tax

A huge new leak of financial documents this week has revealed how some multinational companies secretly make use of tax havens. FTSE 100 energy company SSE believes it should be the norm to report tax payments on a country by country basis, as they already do. Here Alistair Phillips-Davies, SSE’s Chief Executive, explains why paying taxes matters to them.

SSE is, above all, a long term company. Its heritage is rooted in the hydro-electric schemes in the north of Scotland and the rapidly growing post-war electricity network in southern central England. It owns assets that have existed for over 40 years, and which will continue to exist for at least another 40 years. It is this long-term approach that led us to think long and hard about the values that underpin the taxes we pay.

One rule for some, another for everyone else

There is little doubt that the tax companies pay is under increasing public scrutiny. The Institute of Business Ethics publishes a survey each year, measuring the business issues of concern to the British public. That survey tells us that tax avoidance by big businesses is, by far, the issue of greatest concern; and the 2016 survey demonstrated that the salience of the issue is growing.

It seems to me that the most damaging notion to the relationship between big companies and the people they serve is an idea that ‘there is one-rule for those with the levers of wealth and power, and another rule for everyone else’. I believe this is an incredibly damaging concept and one that undermines the social contract within which we all exist.

A social contract between business and the society it serves

Our obligation is to create successful businesses that share the wealth created
The social contract between the citizen and its government is easy to understand – citizens vote, they pay their taxes and they benefit from the security and benefits that public services provide. Companies, in my mind, need to consider themselves in the same context. Our obligation is to create successful businesses that share the wealth created; by providing good jobs that pay fair wages, paying our taxes, providing an appropriate return to shareholders – and in SSE’s case – investing in the low-carbon energy infrastructure the country desperately needs.

SSE depends on good public services: to educate our employees, keep them healthy and transport goods and services to customers. So there has to be a quid pro quo. Rather than corporation tax being thought of a penalty on profit, it should be seen as a sharing of success. And I am proud that SSE is one of the UK’s largest tax payers. In 2016, we were the 14th largest tax payer in terms of taxes paid which includes: environmental taxes, business rates and corporation tax.

Rather than corporation tax being thought of a penalty on profit, it should be seen as a sharing of success
Of course SSE would never seek to over pay tax: we have an important responsibility not to do so to both our customers and our shareholders. But we do rule out the sorts of practices that mean we could avoid tax. We will not use tax havens and we will not use artificial profit shifting mechanisms. We seek to have a constructive relationship with the tax authorities in each of the countries we operate in.

Country by country reporting: demonstrating international proportionality

We understand a responsible approach to tax by big business is important to the wider economy and – in particular – the principles of responsible taxation are of vital importance to the developing world. SSE operates in two countries – the UK and Ireland – and we publish a country by country report. Presented in a table form our customers and stakeholders can see the scale of our operations in each market: the number of people employed; the revenue earned; and, the assets owned. If SSE grows into new markets, we will be committed to reporting the scale of our operations there, too.

The Fair Tax Mark: voluntary accreditation for responsible tax

At SSE we understand that what we say about our tax affairs was not necessarily enough to reassure our customers. That was why we looked to the Fair Tax Mark – the world’s first independent accreditation for fair tax – to provide a third party certification that we meet their standards. SSE has just been awarded the Fair Tax Mark for the fourth year in a row – cementing our long-term commitment to play fair by tax.

I would like to think, in years to come, the standards SSE has voluntarily signed up to will become a norm with the connection between business and society having been strengthened as a result. The reason for this is simple. In the long run it is in all our interests that we live in a successful economy with strong public services supported by responsible private businesses.

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Alistair Phillips-Davies