BUDGET: Experts hit out at avoidance proposals
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Experts have criticised the Budget’s proposals to instate a General Anti-Avoidance Rule.
Alongside today’s Budget proposals, the Government says it will consult on the possibility of a GAAR in an attempt to plug any gaps in the tax system.
In an accompanying paper, Tax Policy Making: A New Approach, the Government says it may install a GAAR “to prevent increasing avoidance complexity and reduce the need for frequent legislative change.”
But experts have warned that the plan, which was thrown out in 1999, would impinge on UK business.
Berwin Leighton Paisner head of tax Michael Wistow says: “The announcement that the government is considering the introduction of a GAAR will come as a disappointment to business. A GAAR would only create uncertainty by placing the onus on companies to seek permission from HM Revenue & Customs every time they want to carry out a transaction and has not worked in countries like Australia and Canada where it has been introduced.
“A GAAR would be counterproductive if the Government carries through with its welcome commitment to simplify the corporate tax system.”
Chartered Institute of Taxation tax policy director John Whiting says many of the same underlying concerns remain about a GAAR that were raised 11 years ago.
He says: “A clearance mechanism would be needed; to provide fairness, some of the existing clutter of anti-avoidance rules would have to be abolished.
“Much has changed since a GAAR was last looked at: we have the successful disclosure regime; we have Targeted Anti-Avoidance Rules and we have the courts taking a much stronger line on avoidance. Given all of these, a key question will be whether a GAAR is necessary or adds anything.”
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Readers' comments (1)
Sean | 23 Jun 2010 8:26 am
Who would decide what 'avoidance' constitutes? Is investment in a genuine commercial activity which by the nature of its business trades at a loss initially, which can be offset against personal tax, be classed as avoidance?
Apart from which all the exams I have taken keep telling me that avoidance is legal and evasion is not? Maybe they should just right tax legislation in such a way that it cant be abused?
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