Government ‘could do more’ to make IT companies pay fair share of tax

The government should be using its buying power to make sure that IT companies with contracts in the UK pay their fair share of tax, according to the Public Accounts Committee (PAC).


The government should be using its buying power to make sure that IT companies with contracts in the UK pay their fair share of tax, according to the Public Accounts Committee (PAC).

In a report, ‘Cabinet Office: Improving government procurement and the impact of government’s ICT savings initiatives,’ the committee said: “The government is not using its buying power to ensure that its suppliers, particularly in the ICT industry, pay their fair share of tax on the profits they secure from business activity in the UK.”

According to the PAC, some of the government’s big ICT suppliers, such as Microsoft and Accenture, are reportedly paying low levels of corporation tax in the UK.

While it would be ‘unlawful’ for government to refuse to buy from suppliers for this reason, the committee suggested: “The development of more coherently managed procurement protocols provides an excellent opportunity for government to exert appropriate pressure on its suppliers whose income on public contracts comes from taxes paid.”

Reforming IT procurement

In 2011-12, central government spent £45 billion on buying goods and services, of which an estimated £6.9 billion was on ICT. The government has been trying to change its procurement practices in order to save money since 2010.

For example, one reform was that all ICT spending over £5 million must be approved by the Cabinet Office. Furthermore, the government has introduced a programme to develop an ICT infrastructure that can be shared across government organisations.

The PAC recognised that the Cabinet Office had had some success, saying that the IT initiatives had resulted in “some savings” and that there were signs that departments were starting to think “more intelligently” about why and how they use ICT. However, it believes that the government could have more success in the long-run if it were to address issues that have emerged in trying to centralise procurement.

“The Cabinet Office should strengthen its capability and capacity to challenge departmental proposals for ICT procurements, identify failure quicker and work with departments to accelerate the change in culture from buying ICT to commissioning services,” the commitee said.

Furthermore, it believes that the government needs to set more ambitious targets for ICT savings.

“A lack of detailed and accurate data has led to the Cabinet Office setting inappropriate targets; expected proportions of spending through central contracts have been unrealistic and the savings asked of departments in ICT procurement have not been sufficiently stretching,” the committee said.

For example, the fact that the 2012-13 targets for two of the ICT initiatives, spending controls and shared infrastructure, were met in the first six months of that year, suggested that they were not “sufficiently stretching”, said the committee.

“The Cabinet Office and the Government Procurement Service will need to work with departments to address these problems, and build shared plans, including much more stretching targets for centralised expenditure and ICT savings,” it said.

Mixed messages

The PAC also criticised the government for not changing its procurement practices to support its commitment to SMEs.

“The government has a long way to go in its aspiration to achieve 25 percent of its procurement spending with small businesses by 2015,” it said.

“Current data suggests that, despite clear commitments, only 10 percent of government spending is currently with SMEs. However, there are also major gaps in SME data, which means that it is not possible to confirm this figure.”

Earlier this week, the Cabinet Office announced new procurement rules for the whole of the public sector that aim to make it easier for SMEs to win business with government.

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