The US has banned BP, temporarily, from bidding for Federal contracts as a result of its "lack of business integrity" following the Gulf of Mexico oil spill. Given BP is paying the biggest fine in US history as a result of that no one can be that surprised, but it leads to another question for me, which is whether not paying tax can also be described as suggesting a "lack of business integrity" that might permit any government to not transact with those whose accounts suggest they are not paying what looks like a fair rate of tax.
I am, of course, inclined to think it is, and I suggest with good reason. A business deal is a two way transaction. The company benefits. The government pays, and hopefully gets value in exchange. But if the company is at the same time doing its best to undermine the revenue of the government out of which it is paid doesn't that show a "lack of business integrity"? In my experience business is very largely based on mutual trust. That mutual trust cannot exist when one party clearly so despises what the other stands for that it will seek to harm its well being by not paying what it owes it.
My suggestion is a simple one: if companies do not pay their tax then they should be denied governemtn business contracts.
And I confirm I am working on an indicator tool to suggest those who do, or do not, pay their tax, but it's not as simple as many people seem to think.
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Is this paying tax according to the law and accepted by HMRC or is it paying according to some tax illiterate groups, such as the Public Accounts Committee or UK Uncut?
If you debar someone who has paid tax according to HMRC and you ban them from state contracts, the state will find itself continuously under judicial review.
If the law says pay or lose out then judicial review has nothing to do with it
Then what is the appeal mechanism? You are going to have one I assume, as the criteria in the main post look pretty subjective (“accounts suggest…what looks like…fair…”) – of course you’d need to tighten things to work out where the discretion lies, what the ratio would be, whether it’s strict liability etc. but someone, somewhere is still going to have to make A Decision, and we normally allow for review of those don’t we?
I think we call that government
But let’s be clear, like all parties it can set its terms
And it is legal for it to set social criteria – paying tax is one of them
It works down here in one of the UK’s former colonies on the tip of Africa….if your tax affairs are not up to scratch – meaning you require a certificate of good standing from the taxamn BEFORE you vie for a tender – then you don’t get government contracts, for anything from a pin to a battleship.
Moves are also afoot to keep a close eye on successful bidders by watching their tax compliance over the full duration of the contract.
You can’t just bar someone from government contract on the back of a moral judgement of whether they paid tax, when according to the laws you have in place, they have paid the correct tax. What next, barring someone who has spoken out against the government of the day. In fact given how many MP have claimed expenses that were in terms of the law, but morally suspect, we wouldn’t have a parliament.
It is fine for individuals to make the decision not to deal with companies that they judge at avoiding tax, but government must comply with the laws as they stand or change the laws. Which of course comes back to the anti-avoidance provision that you have suggested, that is probably the only way to deal with this for the government.
Er, yes you can
You can bar someone for the abuse of law
That’s what tax avoidance is
Most countries do
Poppycock – business is given a licence to operate by Government, which is in turn reflects the will of the people, which requires all undertakings to operate within the compliance mandate. If you don’t play by the rules of full and honest disclosure, return filing, payment, etc., you have not complied with your side of the bargain are are thus excluded from the priveldge of operating.
Play by the rules and enoy the benefits. Play outside the rules and enjoy the demise.
Instead of indicators – how about just extending contractual qualifying conditions to the public tender exercise, based on an overiding general principal, helpfully backed up by specific guidance and examples. If in doubt, companies would need to disclose and pay for clearance to bid.
@Justin Pearce – lets keeps things civil your comments are not welcome here! Richard is certainly not tax literate! Lots of the stuff on here is spot on!
Richard – i always like to play devils advocate and my concern on this one is practicality
Could we not be in a position where PwC sign off on a the profit figures of a company (including revenue recognition – which is a key risk issue), HMRC accept that the return is within the law (ie legal) and has agreed the arms length adjustments… but the indicators says it is against the spirit of the law (i.e. unlegal – venn diagram pending) and so effectively disagreeing with HMRC and PwC so rendering them redundant! The result of this is a company loses out on a billion pound contract!! What is going to happen? The multi national company will take the Government to court!
Would your indicator superceed the HMRC procedures? Sort of a risk indicator or moral compass? How do you seeing it fitting in?
Yes, the government could do that if it wished
Why not?
You can tax plan if you wish
But if you do then you don’t get government contracts
What on earth is wrong with that?