By Ruby Lott-Lavigna: Labour has vowed to prioritise companies paying full UK tax over those registered in offshore tax havens when awarding government contracts, openDemocracy can reveal.
At the party’s annual conference, Labour announced plans to reduce procurement contracts going to tax-avoiding firms if elected, after research by the Fair Tax Foundation revealed that one in six contracts issued by Conservative governments between 2014 and 2019 had tax-haven links.
Policy details seen by openDemocracy shed light on how the party plans to implement greater tax transparency, with a company’s tax status being taken into account when agreeing procurement contracts.
Deputy Labour leader Angela Rayner told openDemocracy that companies receiving contracts would be expected to make commitments to “shun” tax avoidance and not be registered in tax havens
Firms would also be expected to be open about whether they pay full UK taxes. Rayner told openDemocracy that the policy will promote “truth and transparency”.
It is understood that public bodies would still be able to choose to contract companies that are not fully transparent in their tax declarations, but more information would be available for them to make those decisions.
Labour’s proposals also include urging multinational corporations that secure government contracts to provide tax information on a country-by-country basis, declaring information such as revenue, profit, taxes paid, employee numbers and assets in each country they are registered in. While global companies like Apple or Amazon have received widespread criticism for registering profits in countries with lower corporation tax, other lesser-known brands that are contracted by UK local authorities – such as elderly care providers – have been known to register profits overseas.
The party would also use a publicly accessible digital dashboard to track all procurement contracts, as well as keeping a record of all suppliers and their beneficial ownership.
Speaking to openDemocracy, Rayner said: “While the Tories cut murky deals in the dark with their mates using taxpayers’ money, Labour will tender in the public interest, keep the receipts and publish them out in the open because the public deserves the truth and transparency about their taxes.
“Our contracts dashboard will finally ingrain honesty and openness into the heart of public spending, with transparent information about all contracts awarded and suppliers who fail to deliver.”
“The more businesses that shun artificial tax avoidance, profit-shifting and tax havens, the more tax revenues there will be for public services in the UK”
The UK loses an estimated £17bn in corporation tax revenues as a result of profit-shifting alone when companies report their profit in a tax haven, according to the Fair Tax Foundation, a UK-based not-for-profit social enterprise that seeks to encourage businesses “to pay the right amount of corporation tax at the right time and in the right place”.
Paul Monaghan, the Fair Tax Foundation’s chief executive, told openDemocracy that these policies would radically improve a local authority’s ability to do due diligence when outsourcing work.
“There is a growing movement of towns and cities across the UK that want to use their buying power to encourage responsible tax conduct and other social goods – and polling shows that this is supported by a large majority of the public,” he said.
“The more businesses that shun artificial tax avoidance, profit-shifting and tax havens, the more tax revenues there will be for public services in the UK and across the rest of the world.”
Alex Dunnagan, acting director of think tank TaxWatch, told openDemocracy that, “Labour’s proposal to increase the transparency of multinationals should be welcomed. In awarding government contracts its important that the public ultimately knows where their money is ending up.”
Dunnagan added: “Tax non-compliance has been a potential ground for exclusion for government contracts for years, but the issue is enforcement. The Cabinet Office issued a note in 2013 requiring that companies bidding for government contracts declared any tax non-compliance. Following FOIs to over 40 government departments, [TaxWatch] found zero instances of companies declaring non-compliance.