Government rebuffs defence procurement tax recommendation

10 May 2013

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10 May 2013 | Adam Leach

The government has rejected a call to consider potential tax revenue as a factor in supplier selection in defence procurement.

In a report in February into defence acquisition, MPs on the Defence Committee called on the government to direct Defence Equipment & Support (DE&S) - the buying arm of the Ministry of Defence (MoD) - to take account of tax revenues from suppliers when making buying decisions.

In a response published today the government dismissed the call on the grounds such a narrow focus would go against the best interests of acquisition and could also open up the potential for legal challenges from foreign suppliers.

The government said: “The MoD’s primary aim, and for which it is financed, is to provide our armed forces with the best capabilities we can afford, and in doing so, to obtain the best possible value for money. Given our focus is to deliver defence capabilities as efficiently as possible we do not consider the tax revenues the exchequer receives within our investment appraisal process.”

The government defended the contribution made by the MoD to the UK taxpayer, saying it spends around £20 billion a year with the domestic industry, supporting jobs and delivering tax revenue.

In another recommendation, MPs called for the MoD to detail the number and value of contracts it - through DE&S, and its prime contractors - awards to SMEs. The government responded by saying it is not “currently feasible” to produce the figures to an appropriate level of reliability.

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