Duncan Thorp: social enterprises, charities, cooperatives, community groups and other social economy organisations can and should benefit from fair tax reforms

Tax affects us all and everyone has an opinion on it. 

If we care about investing in our public services, pensions and schools and having a fair, equal economy, we need to take part in a more expansive debate about what our tax system can and should do. 

Within this, the voice of social enterprises - businesses that exist for a specific social or environmental mission - must increasingly be heard.  

Just like other enterprises they are more than familiar with the complexities and barriers that exist - for both them and the people and communities they support. 

After all, not only do social enterprises pay tax, but they’re also impacted by wider tax decision-making, including qualifying for vital tax reliefs, for example, for social investment and non-domestic (business) rates. 

At the same time, the level of spending and investment in the social economy is directly impacted by the wider tax decisions made by government and local authorities. 

Put simply, it’s now time for some innovation and fresh thinking about how the tax system can support social enterprises and other inclusive, democratic businesses, so they can deliver more for people and planet. 

To make progress we must challenge the toxic media and political narratives around tax, which tend to see it as a ‘burden’.  

This often presents tax as something to moan about, something we reluctantly pay, something that no one likes. We urgently need to change this damaging conversation.  

In reality, tax revenues enable critical investment in people’s lives and in essential public services. It’s how we invest in our collective prosperity and wellbeing.  

Tax is about paying for our healthcare, roads, policing, recycling, trains and social security - what could be more important than that?  

It’s understandable that people therefore feel angry when they hear stories of tax avoidance and evasion by the wealthiest. 

The Corporate Tax Haven Index shows how the UK is behind a massive one third of global tax dodging, with places like the Cayman Islands and Jersey among the worst offenders. 

This complex Spider’s Web, one facilitated by successive UK governments, is all the more galling when we’re then told “there’s no money left” to support people and public services.  

The language used in this debate really matters. Too often calls to tax the richest a bit more lead to claims that ‘wealth creators’ would simply leave the country. This isn’t true. 

It’s time to reclaim wealth creation to refer to the wealth we all create and the huge value created by social enterprises. This is particularly timely given the welcome focus in Scotland on Community Wealth Building. 

If we want to keep wealth circulating within our communities, supporting local businesses, creating well-paid jobs, and reducing inequality, then the tax system must do more to support this effort. 

We’re happy to support calls for action and debate from Tax Justice Scotland, including for the Scottish Parliament to better use its tax powers to build a greener and fairer country.   

In Social Enterprise Scotland’s new manifesto for the Holyrood election we’re clear that we understand the big challenges facing Scotland’s public finances and the need to balance spending.  

However, while many tax and finance powers are reserved to Westminster there are still countless tax options at a devolved level that can and should be used more effectively. 

We urgently need some imagination and new policy solutions around tax.  

More tax revenues must be invested in businesses and community groups that deliver social and environmental impact, directly benefiting both Scotland’s people and our economy. 

For example, there’s a clear opportunity to simultaneously implement tax reliefs for social enterprises, while raising more money from other taxes to finance greater investment into inclusive, democratic businesses.  

Doing so would mean more investment into a growing sector of  Scotland’s economy, that specialises in prevention and early intervention, reducing pressure on public spending in future. 

In terms of additional tax reforms this could mean replacing the failed Council Tax, reforming business rates, potentially introducing new land and property taxes and ensuring a better return from future Crown Estate offshore renewable energy licenses. 

In addition we must ensure that the billions in public sector pension funds are invested directly into communities and social enterprises wherever possible. 

A form of Selective Employment Tax could be considered, where highly profitable and polluting industries are taxed more, with the extra tax revenues invested in the social economy. 

It could also mean attracting workers from other parts of the UK, using Scotland’s strengths and better quality of life, therefore increasing income tax revenues. 

By tackling tax avoidance, evasion and fraud at all levels, using technology to simplify and streamline the tax system and working with the UK Government on social investment tax reliefs and other areas, many solutions can be found.  

There’s a massive opportunity for Scotland to lead on new, imaginative methods of tax reform while also seeking to influence wider changes in the UK and worldwide. 

The perception of tax could then be transformed from negative burden to empowering tool, that delivers positive change for the people of Scotland. 

Duncan Thorp is policy and public affairs manager for Social Enterprise Scotland.