Email your MP today and ask them to write to the Treasury to change their minds and act on PFI tax avoidance, says Stella Creasy MP.
By Stella Creasy MP (Labour and Co-operative, Walthamstow)
Much has been written about how to reform PFI and its costs, but little about the benefits – in theory one of them is that funding private sector companies to run public sector projects will generate tax receipts as a by product. However, a new report from the Public Accounts Committee published today shows again when it comes to tax this government is all avoidance and no action.
The report highlights how tax revenue is being lost as PFI contractors move assets offshore to havens such as Guernsey or Jersey. The Treasury admits it has no idea if these companies pay corporation tax or any taxes liable on the profits or equity gains these lucrative contracts generate.
This isn’t just a problem for the taxman but goes to the heart of whether a PFI deal can be considered value for money. The projected receipts generated from working with private companies are integral to deciding the advantage of PFI as a means to procure goods like schools or new roads, rather than directly paying through the public purse.
Yet if the sums involved in making this choice aren’t accurate because the Exchequer doesn’t then get that tax back, the decision to use PFI itself could be equally defective.
Treasury guidance (pdf) on managing public money allows for the “tax planning” of bidders to run these contracts to be taken into consideration and indeed in 2003 the previous government issued a directive on discouraging tax avoidance through procurement. However, there’s little evidence this is being used to prevent this behaviour by these firms.
If this government is serious about securing a good deal for the UK taxpayer they have two choices.
They could rewrite The Green Book rules governing how the value for money of PFI deals is assessed so that this faulty maths isn’t part of the procurement process. Alternatively, they could act to strengthen the guidelines and how “tax planning” is determined so that these calculations of value for money in principle become fact.
Either option could improve both Treasury procurement practice and accountability in spending public money – yet instead the government has already admitted it has no plans to do anything about the problems with how the Green Book deals with tax in PFI deals.
Of greater concern, it is pressing ahead with using this misleading way of calculating the value for money of the new PFI projects it is currently negotiating that are worth £7bn. Given one company running more than 33 PFI schemes made more than £38m in profit alone last year but paid just £100,000 in UK tax, the potential sums of lost tax revenue could be vast.
That the Treasury doesn’t even know how much money they’re due shows their complacency, and the complexity in holding them to account for the money we’re losing. Yet failure to try to act on this is not an option in times of austerity – it’s time we told them we want our PFI tax back.
Think the government should get its sums right? Email your MP today and ask them to write to the Treasury to change their minds and act on PFI tax avoidance.
28 Responses to “Time to get our PFI tax back”
Ally
Stella is just pointing out what needs to be done. She was not in parliament when this was first proposed. The public private partnership was mooted by Lord Prescott. I knew it would be a disaster for the tax payer as it like getting money from a loan shark. Sounds a good proposition until you find out the small print. This is what we are discovering just now.
Also given that this was a tory policy borrowed by the blairites its hard to see how anyone can blame labour. It was new labour the Frankenstein creation of Mandy and Butcher Blair that pushed all these things through.
It does have to be pointed out that if fatcher and co had not criminally under resourced the public sector and sold everything off to big business Labour or even new labour would bot have been put in this position.
I agree its time for the government to start governing and to get our taxes back from the rich instead of deriding the poor all the time.
Tax Adviser
For your info:
All pfi companies based in the UK are taxable in the same way any other company. So HMRC receives tax on profits made by PFI companies.
Shareholders in PFI companies are different. Tax concessions are made to them for all different commercial and social reasons. UK pension funds are do not pay tax and are big holders of pfi investments. Offshore investors also receive concessions but these need to be set off against UK plc trying to attract international investors and the quid pro quo for UK investors investing elsewhere in the world. UK insurance companies pay tax on their investment returns etc.
Sorry – but you should really spend an hour or two with a tax partner of an accounting firm so that your trajectory becomes credible to those that matter!!
A New Voice
Time to get our PFI tax back: Any offers to help compile an on-line database of such abuses (I can host) http://t.co/tPPTRbZ
Jonathan da Silva
PFI it’s value for money only if you make ludicrous assumptions! Thanks Stella, shame no one from Labour stood up a few years ago.
A trillion in extra debt (not counting PFI liabilities) from circa 2001 for temporary and unsustainable improvements in health and education (if one ignores the preventable deaths from the Foundation restructuring and MRSA/C-DIFF). Bow waves of debt from moronic military spending as our troops want for effective equipment. Can you exaggerate contempt for people and venality of the Brown/Balls/Ed Miliband core’s behaviour at the exchequer?
Of course one has to accept Mr Brown’s view we could not borrow directly except of course to pay handouts to banks so the Govt’s friends could maintain their affluent lifestyle at the expense of taxpayers and savers.
Sadly this seems clearly a corrupt practise to make friends of the then ‘Govt’ rich[er]. Off balance sheet stuff that Mr Brown so criticised Enron for. No wonder ex Labour ministers are doing very well at Davos, Bilderberg, torturers’ conventions and banking communities paying to hear their speeches in empty halls everywhere.
Is there any guarantee the one assumes next Labour Govt will not be corrupt led by 2 acolytes of Brown?
London IWW
#Capitalism: Time to get our PFI tax back http://t.co/IJKhzQ6 | #TaxAvoidance #Corporatocracy