Is the Treasury telling the truth on anti-avoidance?

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According to the FT, a Treasury spokesman said in response to Nick Clegg's suggestion of a tycoon tax this weekend:

“There are people out there making use of various reliefs and loopholes who don't pay much tax at all."

That is undoubtedly true. But they added:

"There is a commitment across government to close those loopholes.”

That, I doubt.

First, Graham Aaranson's general anti-avoidance rule is no such thing. As he says:

I have concluded that introducing a broad spectrum general anti-avoidance rule would not be beneficial for the UK tax system. This would carry a real risk of undermining the ability of business and individuals to carry out sensible and responsible tax planning. Such tax planning is an entirely appropriate response to the complexities of a tax system such as the UK's.

 In other words he has no intention at all of closing all the loopholes. He does instead:
However, introducing a moderate rule which does not apply to responsible tax planning, and is instead targeted at abusive arrangements, would be beneficial for the UK tax system.
But what is responsible tax planning? Aaranson has tried to create a test. What is already clear is that public demand will not be satisfied by it. I suspect Clegg knows that, and that;s why he's moving on.
The Tories won't: Aaranson is a gift to them. It says it's a general anti-avoidance rule but doesn't do what it says on the tin. But all the time what we really need is a plan for true reform. As I said in response to first hearing of the tycoon tax this requires real reform to work. Things like this:
1) You have to align capital gains tax and income tax rates.

2) You have to get rid of discriminatory domicile rules.

3) You have to stop people shifting significant amounts of income and gains to their partners.

4) You have to make people personally taxable on the income of their personal service companies.

5) You have to make sure that offshore is open to view — or people will hide their income there. But this government is planning to preserve offshore banking secrecy for good through its deal with Switzerland.

6) You have to stop people diverting their income into trusts for family members, and treat those trusts as the settlors.

7) You've got to have a real general anti-avoidance principle.

8) You need an effective corporation tax on major multinational corporations and the curtrent government is destroying that tax.

9) We need real taxes on wealth.

10) Local authority tax has to be transformed.

and of course:

11) Benefits have top be fair, sometimes universal, and have effort expended on them to make sure they are claimed.

I don't believe the Treasury is committed to those things. In that case the loopholes will remain. And what they're saying is not true.


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