CICTAR Briefing paper: Tax and Procurement in the EU
This briefing developed by CICTAR, in partnership with the European Federation of Public Service Unions (EPSU) explains why the current European Union (EU) Directive on public procurement must be reviewed and updated to explicitly incorporate an evaluation of the tax behaviours of any corporation that tenders for public sector contracts.
New, and updated, analysis highlights how some of the biggest public sector suppliers in cloud, software and consulting operate through complex structures that can leave public authorities overpaying twice: first through contract costs, and again through lost tax revenue.
There is a growing strategic risk of long-term reliance on a small number of vendors as public administrations roll out cloud and AI systems, while public budgets remain under strain. The briefing argues that “value for money” cannot be separated from tax behaviour when procurement decisions shape the resources available for health, care, local services and public administration across Europe.
The public sector is a major purchaser of goods and services and should use its collective market power to raise standards and increase transparency. Awarding contracts to corporations that engage in aggressive tax avoidance could distort competition within the Single Market and may conflict with EU state aid rules.
Far better evaluation of tax behaviour is necessary to level the playing field and give smaller and responsible businesses across the EU a fair chance. Competition for public sector contracts unfairly disadvantages these businesses if multinational corporations can win public tenders based on a widespread global practice of aggressive tax avoidance along with low wages and substandard working conditions. Growing dominance by a small number of large corporations, including in public sector contracts, can stifle innovation and competition and can lead towards monopolisation and rent-seeking. A low-price tender offer should be excluded if it is enabled by a track record of externalising costs, including through aggressive tax avoidance.
However, it can be extremely challenging for contracting authorities – often with limited resources – to determine patterns of aggressive tax avoidance in large multinational corporations. Given the imbalance of power and resources, the burden of proof for tax compliance should be placed on the entity seeking public contracts. There needs to be a standardised set of tools for contracting authorities to use in requesting and evaluating tax compliance and some centralised shared guidelines and resources.
EPSU and CICTAR call for practical, enforceable changes as EU procurement rules are updated, including:
tax transparency requirements for large bidders, using the same country-by-country information multinationals already provide to tax authorities (for groups above €750 million global revenue);
a simple, EU-wide Tax Compliance Certificate managed at EU level to reduce the burden on under-resourced contracting authorities and standardise checks across the Single Market;
clearer exclusion mechanisms when bidders refuse key information or show high-risk tax structures inconsistent with their real economic activity.
Europe’s procurement rules must be clear: if a company cannot contribute fairly to the societies it takes advantage of, it should not profit from public contracts.
“Public service workers are expected to do more with less, while some of the companies receiving public contracts are doing everything possible to contribute less,” said “Public money should strengthen public services, not subsidise business models built on aggressive tax avoidance. The revision of the EU’s procurement rules needs to make tax transparency a basic condition for winning large public contracts.”
Press contacts
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