Mark Farrar, CEO, AAT (Association of Accounting Technicians) explains why unethical practices can create problems...
Beware of unethical business practices
We’ve all heard about recent scandals that have engulfed some multi-national corporations, be it the spill from BP’s Deepwater Horizon oil rig or the low levels of tax paid by the likes of Google, Amazon, Starbucks and Apple. Apparently unethical practices such as these have impacted on each brand’s reputations, and furthermore may have hit the nation’s conscience when it comes to major purchasing decisions.
According to new research from the Association of Accounting Technicians (AAT), more than two out of three consumers say that, when making decisions about buying products or services, they are directly influenced by the ethical behaviour of the company involved. This doesn’t just affect their purchasing thoughts when it comes to the largest of companies, but across all businesses and organisations.
Having an ethical framework at the heart of your business can therefore be vital in attracting and retaining new customers. This is particularly true in relation to company taxes, with 43% of respondents telling us that not participating in tax avoidance was an important consideration when they were deciding whether or not to engage. Other ethical factors that ranked highly for consumers included maximum transparency around company accounts; having a strict ethical code over their supply chain; and being careful with sensitive client data.
While tax avoidance may be legal, numerous high profile cases mean that the Government – supported by consumer sentiment – is keen to clamp down on the tax gap. This gap is defined as the difference between the amount of taxes collected by HMRC and the amount of taxes owed. It’s currently believed to stand at between £33 and £34 billion, with small and medium-sized businesses (SMEs) being responsible for the bulk of the deficit at an estimated £16.5 billion.
Many SMEs have limited resources which can often present challenges when it comes to tax compliance and adopting best practice. But as our research shows, demonstrating strong ethical behaviour is seen to be the right thing to do. Consumers want to feel confident in the choices they make, and it can therefore be good for businesses who undertake best practice.
Of course, a key challenge around tax within the SME sector is the perceived injustice of sweetheart deals between HMRC and larger businesses. Here large companies appear to pay tax via negotiation rather than by the rules, creating an understandable sense of injustice amongst the SME community. There are signs that HMRC is beginning to tackle this problem but much more remains to be done.
Mark Farrar, CEO, AAT (Association of Accounting Technicians)