New Revenue . Some contracting will create new revenue for the public agency. New revenue should be deducted from the total cost of contract service for comparison to the cost of in-house service. Revenues may be the result of government asset sales, income from operations or new tax revenues generated by the private contractor. Forgone Tax Revenue .
Private contractors pay taxes.
They pay corporate income taxes, property taxes, sales taxes, user fees and other taxes, which accrue to the public. Public-sector providers pay very few, if any, of these taxes. Public officials should consider tax revenue in the decision whether to contract for services. Governments in New Zealand and Australia assess a tax equivalency charge to public units in managed competitions. The San Diego, California school district serves as an excellent case study of what not to do when considering contracting out service provision.