Last week, the UK Government announced that public sector buyers should start taking into account the track record of potential suppliers in terms of tax avoidance when they make supplier selection decisions.
That is perhaps not quite as dramatic as it first sounds. There has been the ability under EU procurement regulations for many years to exclude firms who have evaded tax, just as you can rule out firms who are bankrupt or whose directors have criminal records (in some cases at least). But this new announcement has pushed the issue up the agenda considerably.
Procurement executives are not, however, expected to become forensic tax analysts, or make judgements about what constitutes tax transgressions. The definition of what potential suppliers have to declare is quite narrowly drawn. So simply being headquartered in the Bahamas or Cayman Isles, or paying royalties to a buying office in Zug, Switzerland, to reduce profits in tax inefficient domains, won’t mean a firm is eliminated from the bidding.
And firms can also claim mitigation even if they have had historical problems – for instance, saying that new management has come in and sorted out the problem will probably be enough to escape problems.
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