LONDON (Reuters) - The government stepped up its campaign against companies paying less than their fair share of tax when it announced details on Thursday of new rules that may bar corporate tax dodgers from competing for public sector contracts.
Companies bidding for government contracts will have to provide details of their tax compliance history, including tax returns that have been judged incorrect, under the draft new rules.
“The government is clear that aggressive tax avoidance is totally unacceptable,” Danny Alexander, Chief Secretary to the treasury, said in a statement.
Britain’s government, like many others around the world, wants to clamp down on tax avoidance by companies as it tries to raise more revenue and close its budget deficit.
Companies dodging tax would not be automatically banned under the rules, but government departments would have the option to terminate contracts and disqualify them from bidding if firms were found to use abusive tax avoidance schemes.
When the issue hit the headlines last year, British MPs singled out Google, Amazon and Starbucks as companies that pay very little tax in Britain on profit from sales in the country. The firms say they comply with British tax law.
Last month Prime Minister David Cameron warned companies which did not pay their fair share in tax that they needed to “wake up and smell the coffee”.
However, one legal expert warned the proposals could unfairly hit smaller firms.
“Even relatively small contractors will be faced with impracticable demands to show they are compliant with the tax morals of the moment and no thought has been given as to how firms will show they are on the side of the angels,” said Aaron Fairhurst, a tax partner with law firm CMS Cameron McKenna.
The new procurement rules were published for consultation on Thursday ahead of their planned introduction on April 1.
The announcement came on the same day parliament’s spending watchdog, the National Audit Office, reported tax inspectors had missed a target to reduce fraud and error in the system dealing with government payments to low income workers by 850 million pounds.
Margaret Hodge, chairman of parliament’s Public Accounts Committee, said tax chiefs needed to “get a grip” on the issue.
Reporting by William Schomberg; editing by Michael Holden