Competitive neutrality can be addressed by incorporating into the financial analysis estimates of the financial payments that the public sector would have to make if it were subject to State taxes.
The most significant State tax will often be payroll tax. Most agencies are in any event required to pay payroll taxes, so that an estimate of these tax equivalent payments should be used. If the exempt agency is considering private sector involvement where the private providers would be required to pay the tax, then an estimate should be made of the value of the exemption received by the exempt agency. If an agency is exempt from payroll tax and all private bidders are also exempt, is it not necessary to impute payroll tax in the PSC.
Tax equivalent streams may also need to be estimated for a variety of other States taxes - notably Financial Institutions Duty (FID) and land tax.