The Turnbull government has released a consultation paper outlining how it plans to strengthen the Commonwealth’s procurement processes so that “contracts are only awarded to businesses which have a good compliance history.”
The consultation paper said there are plans to develop a Procurement Connect Policy (PCP) that would require businesses from 1 July 2019 to provide a statement of tax record from the Australian Taxation Office (ATO) to help determine if a business has “demonstrated satisfactory engagement with the tax system, rather than a perfect tax record.” This process will apply to businesses that are seeking to tender for any Commonwealth procurement contracts over $4 million.
“This will ensure that businesses that generally do the right thing but may have made unintended or minor errors, and taken steps to rectify the issue, can still tender for government business,” the paper said.
As part of the PCP, the paper noted the ATO will build an online system so businesses will be able to request and receive these statements.
The consultation comes off the back of the federal government commitment, which it made in this year’s Budget, to implement a number of recommendations that were delivered in the Black Economy Taskforce’s final report in October 2017.
The consultation will also determine if the Black Economy Taskforce’s recommendation to adopt a Voluntary Tax Transparency Code for large businesses with a turnover of $100 million or more is warranted. The idea behind this is to encourage large and medium-sized businesses to publicly disclose their tax affairs and that they are not engaging in aggressive tax avoidance.
Minister for Revenue and Financial Services Kelly O’Dwyer said the government is acting on the Black Economy Taskforce findings that the supply chain is becoming more complex and competitive and can disadvantage honest businesses.
“In some cases, suppliers may be outbid at the procurement point by those who have unfairly cut costs by not complying with their tax obligations. This puts suppliers that do meet their regulatory obligations at a commercial disadvantage,” she said.
“The government is taking the opportunity to level the playing field. The new requirements will not only give businesses a fair go, it will instil public confidence that honest businesses are being awarded government contracts.”
Submissions to respond to the consultation paper will close on 15 June 2018