Watchtower is breaking its own rules on this matter in order to save money. In their own literature flags are referred to as 'objects of veneration'. Objects of veneration are idols. Also in their own literature it isn't simply the veneration of idols that is condemned but the very possession of an idol that is condemned. The following is a quote from g 8/08 pp20-21
Religious icons and idols are representations, or symbols, of anything that serves as an object of devotion or veneration. They include crosses, statues, pictures, or any other likeness of things in heaven or on the earth.* Flags can also be objects of veneration.
The use of such objects in worship goes back thousands of years. Hence, in 1513 B.C.E., when giving the fledgling nation of Israel the Ten Commandments, God clearly stated his view of religious images. He said: “You must not make for yourself a carved image or a form like anything that is in the heavens above or that is on the earth underneath or that is in the waters under the earth. You must not bow down to them nor be induced to serve them, because I Jehovah your God am a God exacting exclusive devotion.”—Exodus 20:4, 5.
Note God’s twofold prohibition: First, his people were not to make images for worship, and second, they were not to “bow down to them” or serve them.