Agenda item

Councillor Gary Hewson proposed the following motion:

Full Council notes that:

(1)      The pressure on organisations to pay the right amount of tax in the  right place at the right time has never been stronger.

(2)      Polling from the Institute for Business Ethics finds that “corporate tax           avoidance” has, since 2013, been the clear number one concern of           the British public when it comes to business conduct.

(3)      Almost two-thirds (63%) of the public agree that the Government and           local councils should consider a company’s ethics and how they pay           their tax as well as value for money and quality of service provided,           when undertaking procurement.

(4)      Around 17.5% of public contracts in the UK have been won by           companies with links to tax havens.

(5)      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.

(6)      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:

(7)      Paying tax is often presented as a burden, but it shouldn’t be.

(8)      Tax enables the Council to provide local services and enables policing and defence. It also helps to counter financial inequalities and rebalance distorted economies.

(9)      As recipients of significant public funding, the Council should take the lead in the promotion of exemplary tax conduct; be that by ensuring that the contractors we enter into partnership with are paying their proper share of tax, or by refusing to enter into contractual arrangements when buying land or property if offshore tax arrangements are in place by the seller.

(10)    Where substantive stakes are held in private enterprises, the Council should use its influence 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-AbuseRule.

(11)    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.

(12)    Lincoln and the Council should stand up for responsible tax conduct and the Council should do what it can within existing frameworks and pledging to do more given the opportunity, as active supporters of international tax justice.

Full Council resolves to:

(13)    Approve the Councils for Fair Tax Declaration.

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

(15)    Ensure our contractors implement IR35 robustly and pay a fair share of employment taxes, in line with our employees.

(16)    Not use offshore vehicles for the purchase of land and property, especially where this leads to reduced payments of stamp duty.

(17)    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, which should benefit the City.

(18)    Demand clarity on the ultimate beneficial ownership of our suppliers and their consolidated profit & loss position.

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

(20)    Support Fair Tax Week events in the area, and celebrate the tax contribution made by responsible local businesses who say what they pay with pride.

(21)    Support calls for urgent reform of EU and UK law to enable the Council and all other local authorities to better penalise poor tax conduct and reward good tax conduct through their procurement policies, to achieve best economic value for Lincoln businesses and residents.

Councillor Hewson, in presenting the motion, outlined that other Councils across the country with different political leadership had supported this motion.

Councillor Ric Metcalfe seconded the motion, stating that tax avoidance and evasion cost everyone billions of pounds per year. He acknowledged that multi-national companies shifted profits to low tax jurisdictions with some legitimised through tax avoidance notions. The Government had published a strategy in 2019 for dealing with this issue entitled ‘no safe havens’. This provided for a global exchange of information and introduced a range of penalties, supporting internationally agreed rules. Councillor Metcalfe agreed that the introduction of such a strategy was a step in the right direction but felt that there was significantly more to be done and that local authorities should also play their part. An essential element was to maximise revenues nationwide to meet the cost of public services.

Councillor Ronald Hills reflected on the two key words of avoidance and evasion and the inference that the two terms were interchangeable, stating that tax avoidance was completely legal whereas tax evasion was a criminal offence. He was concerned that the motion was seeking to provide the Council with powers to refuse contracts to businesses in relation to tax avoidance, explaining that anyone who completed a tax return could be considered guilty of tax avoidance. Councillor Hills was of the view that what really mattered was the law of the land, with tax evasion being the significant factor, and proposed an amendment to remove (13) to (20) of the resolution so that the Council resolved to:

‘Support calls for urgent reform of EU and UK law to enable the Council and all other local authorities to better penalise poor tax conduct and reward good tax conduct through their procurement policies, to achieve best economic value for Lincoln businesses and residents.’

Councillor Edmund Strengiel seconded the amendment and referred to the marriage allowance as an example of how individuals were encouraged to avoid tax, not evade it. He was keen to ensure that small businesses were not negatively impacted as a result of such a motion.

Councillor Metcalfe drew members’ attention to (17) of the resolution which read:

‘Full Council resolves to 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, which should benefit the city.’

He was of the view that more action was required because the current law restricted the Council’s ability to be able to adequately act. He was of the view that the reasoning for the amendment was a misrepresentation of the intention of the motion and that the amendment removed most of the good things about improving best practice.

A vote was held on the amendment and the amendment was lost.

Returning to the original motion, Councillor Lucinda Preston agreed that the motion represented best practice, with fair taxation essential for the delivery of publicly funded services.

Councillor Thomas Dyer did not feel that the majority of the motion was relevant to the City Council and that it represented virtue signalling. He was concerned that small businesses would find it even more difficult to enter the tendering process for contracts as a result of this motion being implemented.

Councillor Hilton Spratt reiterated that tax evasion was a criminal offence whereas tax avoidance was perfectly legal. With regard to tax avoidance, he outlined that this was a moral consideration but highlighted that tax was not based upon what was moral, it was based upon what the Government agreed should be levied.

Councillor Hewson acknowledged that more needed to be done by central Government but explained that the motion represented the City Council taking a stance and seeking to deliver best practice.

RESOLVED that the motion be approved.