Government officials are considering the viability of ordering suppliers bidding for Whitehall contracts to disclose the amount of tax they pay in the UK relative to their UK revenue, Computer Weekly has learned.
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The move follows recent revelations that multinational companies are paying little UK taxes relative to the size of their business. The Public Accounts Committee this week quizzed executives from Google, Amazon and Starbucks over the small amounts of corporation tax they pay.
It is common practice - and not illegal - for international firms to use accounting tricks such as paying internal charges to an overseas head office to reduce the declared profits of their UK operations.
Private Eye this week disclosed that some of the largest IT suppliers to government are also minimising their UK tax contribution.
The magazine claimed that IBM paid just £30m corporation tax over four years, despite revenue of £15bn and profits over £1bn. Private Eye also cites Fujitsu, Capgemini and HP as likely culprits.
Computer Weekly also disclosed that CSC paid just 0.5% tax on £1.5bn income earned from a 10-year outsourcing deal with Royal Mail signed in 2003.
Whitehall officials are awaiting the outcome of the Public Accounts Committee inquiry into tax avoidance to see what recommendations it makes. Any move to require disclosure of a supplier's tax position relative to revenue would need checking for its legal enforceability, including compliance with European Union regulations.
The government wants to encourage greater transparency from its suppliers and in an ideal world would like open disclosure of a company's UK tax contribution as part of its requirement from suppliers. At the very least, officials hope that tax transparency would allow smaller UK businesses to compete on a more level playing field, and for citizens to understand the true costs of awarding contracts to large multinational firms.
Although the government would not be able to single out IT suppliers for a policy of tax transparency, such a move would help to support plans to give more contracts to small UK IT companies and cut the cost of IT spending across Whitehall.