Tax transparency will be a growing issue for government IT suppliers

Considering the amount of taxpayers’ cash that goes to IT suppliers – some £16bn per year at latest estimates – it was inevitable that the big multinational systems integrators that dominate Whitehall IT would come under scrutiny over their tax payments.

The vultures have been circling over big US firms like Google, Amazon and Starbucks, who have been questioned by MPs over the ludicrously small amounts of corporation tax they pay in the UK, despite the millions (or even billions) of pounds they make from UK customers.

Private Eye has now pointed the finger at IT suppliers, by naming IBM, HP, Fujitsu and Capgemini as likely candidates paying less tax than perhaps they should.

And Computer Weekly contributor Mark Ballard has shown how CSC paid just 0.5% tax on £1.5bn income earned from a 10-year outsourcing deal with Royal Mail signed in 2003.

It’s important to point out that none of this is illegal – it’s all clever accounting, using tricks like paying internal charges to an overseas head office to reduce profits and minimise corporation tax.

But when it comes to supplying government, you get into a whole new moral maze.

Should government be giving taxpayers’ money to IT suppliers who pay very little of that back in tax to the state coffers? And is it, therefore, reasonable to consider the amount of tax paid by a supplier relative to the value of their contracts when assessing their bids for new IT projects?

As disclosed by Computer Weekly, government officials are considering whether or not it is feasible to force suppliers to include details of their tax payments relative to UK revenues when bidding for contracts.

Even if there are legal barriers that make such a move impossible, there is enough data in Whitehall to expose any discrepancies in suppliers’ contributions to UK plc.

The Cabinet Office is trying to make the whole IT procurement process more transparent – wouldn’t it be good to have some sort of online resource that compares major supplier’s tax payments (sourced through HM Revenue & Customs’ IT systems) with the value of the contracts they have?

You can imagine the Government Digital Service putting together a website in pretty rapid time to display that data – wouldn’t it make for some interesting conversations between government CIOs and their suppliers if they could call up a nice graph of that information during contract negotiations?

There’s bound to be more to come on this issue – the big systems integrators would be well advised if they voluntarily adopted a policy of transparency over their real value to UK plc.

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