I note that big business is already seeking to water down Graham Aaranson's already wholly ineffective proposal for a general anti-avoidance rule. Finance Director reports:
Chris Sanger, global head of tax policy at Ernst & Young, told the Telegraph: "Businesses will be closely watching any details to see whether the proposals have the potential to develop and expand beyond Aaronson's original intent. This remains a delicate area, where the Government needs to be wary of introducing uncertainty that could undermine the UK's competitiveness."
As I've already explained, Aaranson has offered nothing like a general anti-avoidance rule, so what they're clearly worried about is that we might actually have the general anti-avoidance rule we so badly need.
So let's be clear what a GAAR does really deliver:
1) It increases certainty for business: you know if you cheat you'll be caught so you don't do it;
2) It provides a level playing field where honest business knows it will not be undercut by dishonest business;
3) It means people compete on the basis of their real product offerings - not on the basis of their willingness to abuse tax law;
4) It means small business that cannot afford to pay expensive lawyers can compete on a level playing field with larger businesses, who do more often exploit tax law;
5) It engenders confidence and trust that all will be treated equally and pay their fair share;
6) As a result it builds the foundation for real wealth creation.
And now let's be clear why big business opposes it:
a) Because they want to protect their monopoly profits based on their hiding what they do in tax havens and elsewhere, all of which might be revealed if a GAAR came into play;
b) They want to compete on an unlevel playing field, tilted in their favour;
c) They want to cheat society to benefit themselves - and most especially their directors and their incentive schemes by short term profit manipulation which is often easiest done by tax cheating rather than by creating real added value;
d) They're lawyers or accountants who want to earn fat profits from this process of cheating society.
That's the choices here.
You can tell which side E&Y are on. And there's no surprise there.
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“4) It means small business that cannot afford to pay expensive lawyers can compete on a level playing field with larger businesses, who do more often exploit tax law;”
I don’t think I buy this. I think that by introducing the opportunity for HMRC to say ‘whilst this may be technically compliant, we think it’s avoidance’ you hand the advantage to those companies who can afford to take a chance on a more aggressive policy and (dare I say it) rely on friends in high places to make any inconvenient investigations go away.
HMRC already have considerable scope to cause havoc in companies – and I speak from bitter (and ongoing) experience. This gives them license to accellerate that sort of thing even against companies who have followed the law. I think you’ll see companies who can’t afford to risk such problems being more conservative (which, in itself, you may consider a positive) but larger ones taking a more aggressive stance because they can take their chances in court.. knowing that even if they ultimately lose they will keep the market share they gained during whatever period of advantage they had (which could be years).
I expect that the likes of E&Y are, privately, rather relaxed – because they will continue, as they do now, to make money devising schemes and make more money defending them if HMRC come knocking. A GAAR shifts the goalposts, but it won’t stop anyone shooting for them. It will, however, deter smaller companies from following the ball in, safe in the knowledge that if what they’re doing is technically legal, the worst HMRC can do is change the rules going forwards.. for everyone. Letting them change them (in effect) retrospectively would concern me deeply. It would absolutely make me, as a finance director, be more cautious.. but I’ve no doubt that competitors with greater means would feel comfortable pushing the envelope a little further. If they get into bother for it then that’s fine… but by then us smaller companies might have been elbowed out of our markets alltogether.
My GAAR would change the goalposts
1) It increases certainty for business: you know if you cheat you’ll be caught so you don’t do it;
you know full well this is bogus. it does not increase certainty, it gives HMRC a silver bullet to go after anything they dont like regardless of whether it complies with the legislation or not. you are looking at this purely from an artificial scheme avoidance planning perspective which are almost exclusively employed by large corporations.
It would be nice if you looked at it from the perspective of the smaller businesses who have neither the inclination or the funds to enagage in any of these schemes but nevertheless may get hit by the GAAR purely for organising their affairs in a more tax efficient way.
At the very least there should be a GAAR clearance procedure which could be linked to the TAD rules.
a) Read the proposal
b) I have been in the SME sector for 30 years – and the GAAR will not hit them as you say
c) I agree with you re clearances – but they should be paid for
It certainly will not increase certainty. In fact the opposite as it:
1. Leaves HMRC with a discretion to invoke the GAAR or not – no certainty there.
2. The discretiion is sublect to objection (or referral to a panel) – again no cetainty.
3. Finally, the final decision of HMRC is subject to appeal to tribunal and ultimately the courts. Again no certainty/
Make no mistake tax advisors and lawyers will make a lot more through the introduction of a GAAR.
You simply need to look at global experience to see that certainty and starving lawyers/accountants of fees is not one of the results of a GAAR.
The certainty is that it’s not worth trying to abuse the law
And that’s really quite easy to do
If those despite that trying to abuse it have increased uncertainty am I really meant to be bothered? Your logic baffles me
When you actually come up with a proper analysis of what abusing the law actually is – your hypothesis is nothing more than that.
If the law was properly written, there would be no abuse of law, apart from what Aaronson has referred to in his paper.
Please feel free to elucidate on what abuses of the law exist beyond what Aaronson is seeking to curtail.
That’s crass
Read Wittgenstein
Wittgenstein the philosopher I have heard of but Wittgenstein the tax academic.
Nevertheles, I await you examples. Then we can have a proper debate.
Read him about the limitations of language
Then you’ll realise how crass your comments on tax law are
“The certainty is that it’s not worth trying to abuse the law”
This is simply false and you must know it. HMRC could invoke the GAAR in cases where the taxpayer might have good grounds for believing they are being wholly compliant.
And as a poster higher up says, the guy this will hit will be the SME, not the large MNC who can afford the best lawyers.
Even HMRC aren’t calling for a GAAR.
Dave Hartnett always told me he wanted one, when he sued to speak to me, before he went wildly off the rails
And the panel process p[roped by Aaranson, which I support (although I’d like it to include a judge) completely destroys your argument on arbitrary use
As ever, shall w keep to facts?
You seemed to have totally dismissed Aaronsons proposals – read your own work – why the change.
Intellectually you seem to swing in the breeze.
Look Aaranson is better than nothing
But a million miles away from what is needed
There’s no swinging there
Just simpletons don’t understand the possibility of such nuance
Then support it and having had a look at it make your case.
I would dearly welcome a GAAR, particularly your proposal, as it would keep me and other deep in professional fees.
I will, of course, make my case for a GAAR