Coalition makes noises on tax avoidance

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I gather the UK government announced yesterday that:

The Exchequer Secretary has asked Graham Aaronson QC to lead a study into a General Anti Avoidance Rule (GAAR). This study will consider whether a GAAR could deter and counter tax avoidance, whilst providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for businesses and HMRC. The Government is committed to predictability and stability for the UK tax system, and would not introduce a GAAR without further formal public consultation

Of course I welcome this. In no small part  I think this the result of my lobbying the LibDems on this issue before the election — creating a commitment on their part which ahs transferred to the Coalition.

I admit I also have reservations. There is no doubt a GAAR is the wrong direction of travel — simply because it creates a rule and the tax profession thinks rules are made to be abused. A General Anti-avoidance Principle would be much better, especially if it included a change to the rules of interpretation so that a purposive construction had to be applied to tax law. I explain that here in work for the TUC — follow the links to the PDF for the expanded argument. I have no doubt such a move will be strongly opposed — indeed Polly Toynbee reports the CBI have already come out against this. No surprise there — they want the opportunity to continue to abuse, no doubt.

There’s more to this move by the Coalition though. They announced more than £2 billion of tax avoidance stopped today — but that was only done by aggregating over the life of a parliament routine tax abuse closure measures which have always previously been attributed annual estimates. And their GAAR press release continued:

As set out in the June Budget, the Government is committed to tackling tax avoidance, and has been clear that it will build in sustainable defences to address long-standing avoidance risks.

The Government's response to significant avoidance risks will be balanced with its commitment to improving predictability and stability in the tax system. The Government will publish on 9 December a draft Protocol that will set out the circumstances in which it will consider changing legislation with immediate effect.

Note the conditionality. The Lib Dems want top tackle avoidance, the Conservatives are saying “over our dead bodies”. Well one cheer for the LibDems then — but let’s see the delivery and I’ll believe it. I don’t yet.

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