MPs have attacked the "unnaceptable" tax avoidance measures employed by some major IT companies, arguing that firms which fail to pay corporation tax should not be awarded lucrative government IT contracts.
In a Parliamentary debate Liberal Democrat MP Ian Swales said that stronger action is needed from the government to prevent large contracts being given to companies which pay little or or no tax."I am convinced that doing public sector business with tax avoiders does net damage to our economy," he said. "Government action could mean that companies quickly change their behaviour."
Swales said that tax avoidance, which is a legal practice condoned by HM Revenues & Customs (HMRC), is putting smaller firms at a disadvantage in terms of government procurement. He said this means that small to medium businesses involved in tendering for government procurement contracts are at a "clear disadvantage when bidding against the tax-avoiding giants".
Conservative MP Charlie Elphicke highlighted Oracle, Xerox, Dell, CSC and Symantec as some of the large IT companies which have paid no corporation tax in the past year. This is despite earning more than £474 million between them from government contracts, contributing to a total UK turnover of £7 billion.
Elphicke labelled this tax avoidance "on an industrial scale"."To me, it is unacceptable, unethical and irresponsible," he said, adding that reform of tax rules should cover contracts awarded to tax avoiding companies."No Government contracts should be awarded to businesses that are fleecing our tax system, and the Government should examine how much UK tax companies pay when deciding who gets plum Government contracts."
Elphicke added:"If taxpayers' money and a Government contract are being awarded, we should look at the taxpayers' money we are paying out and the tax money that we get back when we assess the value for the nation of awarding a particular contract."This would mean including the amount of tax paid by a company in decision making before a contract is awarded, he said.
Companies which pay more corporation tax would be favoured in the procurement process, as the money recouped via tax would be factored into the overall contract cost. "We should consider the question holistically, rather than simply thinking about how much the contract should be let for," said Elphicke.
Labour MP John McDonnell added that Capgemini and Accenture have been awarded contracts with HMRC itself in the past, with Capgemini involved as the lead contractor on HMRC's Aspire contract, for example, despite being identified as tax avoiders themselves.
He said that Capgemini paid £308,000 of corporation tax last year despite making £38 million in profit, roughly one percent of its earnings.
McDonnell also said that Accenture paid 3.5 percent tax on earnings boosted by its £9.6 billion contract with HMRC to supply technical support, with the company paying £2.8 millionin tax on a total of £82 million earnings last year.
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