Come clean about Whitehall tax avoidance schemes, say unions
By Richard Johnstone | 16 February 2012
Unions have called on the government to disclose how many Whitehall staff have been paid under an arrangement that could allow them to pay less tax.
The Department
for Health apologised today after it was revealed that it was paying the salaries of 25 senior staff direct to
limited companies controlled by the individuals.
This will have
almost certainly reduced their tax bills, as corporation tax is levied at 20%
for profits under £300,000, lower than the income tax rate that would have been
paid.
Jonathan Baume, general secretary of the FDA trade union for senior
civil servants, said that he was ‘disappointed but not surprised’ by the revelation that the staff were
paid this way. He called for a transparent end to the arrangements.
It is
likely that most of the people paid this way worked for the DoH’s arm’s-length
bodies, he said, adding that it was also probable other departments had similar
contracts in place.
He
told Public Finance: ‘What we need to
do is find to what extent this happened in core departments and in arm’s-length
bodies. We need to make sure no more contracts are awarded in this way and end
those that are.
‘This happened as
the civil service wasn’t offering effective pay rates and it’s a question about
setting effective pay levels. I think with salaries being held down, this was a
way to get round it. But [the government should] pay market rates, instead of
having this legal but somewhat immoral arrangement.’
The Public and Commercial Services
union has also called on the government to stop what general secretary Mark Serwotka called
‘tax avoidance schemes’.
He said: ‘Public sector workers like customs officers, coastguards,
teachers and nurses have had their pay frozen for two years while price rises
have been going up by about 5%. They face two more years of pay rises limited
to 1% while inflation is still nearly 4%.
‘This amounts to a huge pay cut while some fat cats are trousering a
fortune and being helped by the government to avoid paying the taxes that are
needed to pay for public services.’
A DoH spokesman said that it was undertaking a full
audit of the use of such schemes, in line with the Treasury review of public
sector pay arrangements.
He
added that the department apologised for a ‘misunderstanding’ over the
payments. Health minister Simon Burns said in a written parliamentary answer
last December that no civil servants were being paid in this way.
