Outsourcing companies still free to avoid tax
New rules proposed by the UK Treasury woefully lacking
Yesterday, Chief Secretary to the Treasury Danny Alexander announced new rules “that will allow government departments to ban companies and individuals which take part in failed tax avoidance schemes from being awarded Government contracts.”
Under the rules that come into effect from April, companies that bid for contracts worth £2m or more will now have to declare whether they have fallen foul of wide-ranging tax avoidance rules over the past decade.
Below Ethical Consumers procurement campaigner Leonie Nimmo gives her take on the announcement.
The government's response, which we have waited nearly six months for, is wholly inadequate. It amounts to a request for companies to voluntarily disclose information that HMRC should have anyway.
There are already in place instructions for government departments to restrict contractors' use of tax havens. What Mr. Alexander should have done is provide guidance as to how they are to do this
Under these new rules, it would appear that companies registered in tax havens with huge turnovers but paying tiny amounts of corporation tax will still be allowed to bid for contracts. It is not the unsuccessful avoidance schemes we need to worry about but the successful ones.
Companies avoiding tax successfully will be able to price their contract bids lower and will win more contacts.
The government's own revenue continues to be locked into a spiral of decline, but it doesn't appear to have the courage to grasp the nettle properly.
Like David Cameron's comments on Tax at the World Economic Forum, the current government's policy appears to “say a lot, but do as little as possible”.
Tax avoidance by companies winning public sector contracts amounts to redistribution of wealth from taxpayers to shareholders. This disproportionally hits the poorest people in our society.
Ethical Consumer was one of the first organisations to highlight the issue of tax avoidance amongst private companies being awarded government contracts with our report in 2011.
Read more about our tax justice campaign.