PAC: Government slack on stopping tax avoidance

THE GOVERNMENT is supplied by companies engaging in tax avoidance arrangements, according to a Public Accounts Committee report released today.

The Cabinet and Treasury were accused of failing to obtain the best value for taxpayers from the work it contracts out to private companies.

Government departments are not using their “buying power”, the committee said, to “ensure that [their] suppliers, particularly in the ICT (Information and communication technology) industry, pay their fair share of tax on the profits they secure from business activity in the UK”.

Despite those criticisms, the committee recognised progress has been made.

In particular, the government has centralised the procurement of goods and services bought by all departments, such as energy and travel, on which central government spent an estimated £7.5bn in 2011/12.

Specifically on ICT, the government has introduced a process by which all ICT spending over £5m must be approved by the Cabinet Office, and a programme to develop ICT infrastructure which can be shared across government organisations.

The PAC published four reports today: Integration across government; Early action; Improving government procurement; and Civil Service reform.

Committee chair and Labour MP Margaret Hodge (pictured) said: “A central message emerging from our four reports today is that the Cabinet Office and the Treasury together need to be much stronger if they are to exert effective corporate control over spending in departments and achieve long term sustainable savings for taxpayers.

“[G]overnment is still not fully using its negotiating position as a large customer to challenge those who pay little UK tax on their profits or those who have failed to deliver effectively in previous contracts. The Cabinet Office should consider how suppliers’ performance and record of paying their fair share of tax impact on procurement decisions.

To view the report click here.