Government contracts should not go to tax avoiding firms

MPs have criticised HM Revenue and Customs for awarding multi million pound contracts to large IT companies who are identified as avoiding tax themselves.

In a Parliamentary debate on tax avoidance by big business, several MPs named and shamed the large corporates who manage to reduce their tax bills to miniscule amounts by use of a variety of loopholes, deals and complex tax planning arrangements.

Those who make their money through large Government contracts came in for particular criticism as did the Departments who use them.

John McDonnell, Labour MP for Hayes and Harlington said: "Capgemini and Accenture are the two IT companies with which HMRC has contracts, and both were recently identified as avoiding tax themselves.

"Capgemini, the lead contractor on the £8 billion Aspire contract, paid only £308,000 of corporation tax last year on £38 million of profits—less than one per cent. That company is employed by HMRC but avoids the tax that HMRC seeks to use it to collect. It is extraordinary.

"Accenture, which has a £9.6 billion contract with HMRC to supply technical support, managed to reduce its tax bill to 3.5 per cent, paying only £2.8 million in tax on nearly £82 million of profits in Britain last year. It was employed by HMRC and awarded a massive contract, and then used those resources to avoid paying tax. You couldn't make it up, but it is happening regularly.

"The Government should introduce some principle to ensure that when we award contracts to such companies, we are at least confident that they are not in the tax avoidance business."

Ian Swales, LibDem MP for Redcar, who instigated the debate, also rounded on the double standards employed by companies who are branded as tax avoiders but who benefit from Government contracts and grants. He said: "The UK Government are by far the biggest purchaser and grant-awarding body in this country.

"Is it right that Amazon can get more than £10 million of Government money for a new warehouse in Dunfermline when it is a Luxembourg-based retailer paying little corporation tax in this country, and apparently does not pay VAT on all its sales either?

"Is it right that Accenture, Capgemini and others win Government contracts when they are named as aggressive tax avoiders? Should HMRC itself have sold its buildings for leaseback to Mapeley, a Bermuda-based company? Is it not time that we recognised in financial assessments that most of the profits from private finance initiative and outsourcing contracts are now disappearing offshore?"