Local government to scrutinise potential suppliers on tax evasion involvement
In a move which has been hailed by some as a significant step forward for tax justice in the UK, the government has now stated that all councils across England, Wales and Northern Ireland must quiz potential suppliers about any previous tax avoidance. The new ruling applies to contracts and tenders which were initiated after October 2016 and will consider suspected tax evasion dating back to October 2012.
Whereas previously, although councils were expected to look into illegal tax practices of potential suppliers, the notion of tax evasion went largely overlooked. However, in a bid to tackle the deep-rooted ethical issues surrounding tax avoidance, a new set of detailed, mandatory questions will be asked to any organisations seeking to supply local government.
With large corporations often unmasked as tax avoiders in the public eye, questions of brand trust and ethical practices have been brought to the forefront. Local government procurement totals in excess of £50billion annually, as explained by Fair Tax Mark and Christian aid, who have been campaigning for local authorities to use their purchasing power to drive change since January 2016. Their initiative, Sourced, has been well received by councils nationwide who realise their ability to instigate much needed change to the procurement process.
Motions have been tabled in central government by councillors spanning Labour, Co-operative, Greens, Conservatives and the Liberal Democrats; unifying parties as an area of political importance. Could Sourced become the successor to the less clear Public Services (Social Value) Act of 2012?
So how could this new initiative actually affect buyers and suppliers?
The Government’s new Public Procurement Note will set out the importance of a consistent approach to be applied across the public sector to all potential service contracts in excess of £164,176 and works contracts over £4,104,394.
Buyers, as stated, will be mandated to ask a specific set of detailed questions, enquiring about the tax history of potential suppliers to their council. However, although the new guidance looks to provide positive change and regain the trust of the public, it could take years for centrally mandated notes to filter into local government standard practice.
As suppliers are asked to self-declare their recent history of tax compliance, the new note could signal further work for buyers who may need help in identifying those who breach the exclusion grounds.
The initiative could also prove vital for protecting those suppliers who pay their way responsibly. Whilst some may be shunning public responsibility, those who continue to pay the required taxes could see gains from the exclusion of less ethical counterparts.
Whichever side of the buyer’s desk you sit on, new procurement legislation can only mean a governmental push for further efficiency, whether that be in pricing or in applying practices which protect and positively impact the social value in contracts.
