Businesses seeking to tender for Australian government procurement contracts will for the first time have to show proof they have squeaky clean tax credentials under new guidelines designed to increase the integrity of government procurement.
From July, businesses tendering for contracts over $4 million will be required to provide a statement from the ATO proving they have a satisfactory tax record, the Treasury guidelines say.
“Increasing the integrity of Commonwealth Government procurement processes promotes good tax
behaviour and creates an even playing field for businesses that comply with their tax obligations,” the document, released in March, says.
In a joint message, Assistant Treasurer Stuart Robert and Finance Minister Mathias Cormann say supply chain integrity can be easily undermined as a result of illegal supplier practices, of which purchasers are often unaware.
“This policy is about reducing black economy behaviour by businesses involved in government procurement contracts so the government can lead by example and support businesses that are doing the right thing,” they say.
“The black economy harms those less able to protect themselves and penalises those doing the right thing. The black economy undermines trust and creates an unlevel playing field.”
Connections to organised crime
The policy follows the final report of the Black Economy Taskforce, which found the supply chain is becoming more complex and competitive and recommended targeting government procurement to ensure the government led by example.
That taskforce report, released in October 2017, found the public sector, no less than the private sector, is under pressure to cut costs and may opt for the cheapest bid, “even if it seems suspiciously low”.
It also noted that government across all levels is a large procurer of services in high-risk sectors such as building and construction, security and cleaning, long and complex supply chains are hard to police.
“We have heard of examples where honest businesses are underbid by tenderers with unrealistically low bids. In such cases businesses are unlikely to comply with all tax and employment obligations. In some cases there were connections to organised crime.”
The new policy guidelines will be introduced over a year, with businesses eventually also required to demonstrate they meet superannuation and third party reporting obligations and disclose any court order penalties or convictions for phoenixing, bribery or corruption.
Tax agents and consulting firms that provide advisory services may also have to provide details of their services to show they are not involved in promoting dodgy tax schemes.
The policy comes into force on July 1 and applies to new tenders on or after that date for all goods and services. It doesn’t affect existing contracts.
It requires that companies supply a Statement of Tax Record (STR) within four days of making a tender submission. The STR will remain valid for 12 months.
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