It could be a bad day for tax avoiders. Hidden in the small print of the Budget press notices is the following announcement:
As part of an approach to develop sustainable responses to avoidance risk, the Government intends to examine whether the option of a General Anti-Avoidance Rule should form one element of strengthened defences. This will be part of wider work on improvements to the tax policy-making process.
There had to be some good news in amongst the gloom today. This is just a small sliver of it. Undoubtedly in the notice to appease the Lib Dem coalition partners such a measure is something the TUC has long argued for – and which is is credited with having promoted in recent years – even inside HM Treasury.
It’s an important announcement if followed by action because a General Anti-Avoidance Rule does two things. Firstly it should stop artificial tax planning by basically outlawing it and secondly it should cut down enormously on the amount of tax legislation needed – allowing time to be devoted to more pressing issues of tax reform.
No one should be counting chickens about this as yet, but it is a start
2 Responses to “In the small print – one small bit of good news”
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I read your paper on “the great tax parachute”. Two points – you say it is about rebalancing the state. True but people seem to want a Government that is around 40% of the economy, not a France at 55% of GDP. So increasing tax by 100 billion takes us towards a future most don`t want
Second the graph you show from 2002 clearly shows we were running a deficit every year. Yes revenue fell in 2008 but we had a persistent gap so spending does and did need cutting.
Or are you defending free swimming lessons for all!
I’m afraid that I cannot agree with you that a GAAR will be an instant solution to what you call artificial tax planning – which is a point that has been debated for years in courts around the world. If artificiality is what what is targeted, then the Furniss v Dawson doctrine should be able to do the job just as well as a GAAR is likely to do.
The Canadian experience will send the Govt. running as far away from a GAAR as possible while it is likely that the Australian experience may fortify them, provided they throw in a proper advanced ruling procedure.
My guess is that ultimately the HMRC and government will quietly drop the idea, just as happened in 1998.