The General Anti-Abuse Rule (GAAR) consultation closed last week and has sparked criticism from varying professional representative bodies.
On 20th June 2012, the Government published a formal consultation on a GAAR targeted at artificial and abusive tax avoidance. This followed a study and a report by Graham Aaronson QC that considered whether GAAR could deter and counter tax avoidance, whilst providing certainty, retaining a tax regime that is attractive to businesses, and minimising costs for both businesses and HMRC.
Both the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) agree that the Advisory Panel on the proposed GAAR should be wholly independent, with no representatives of HMRC.
In their response to the consultation on draft GAAR legislation, both bodies say:
- The proposals risk handing too much discretionary power to HMRC;
- The Government should retain safeguards recommended in the Aaronson report, such as that tax consequences must be the ‘sole or main purpose’ of an arrangement and not ‘just one of the main purposes’;
- The introduction of the GAAR should be delayed to allow time for guidance to be put into place; and
- The GAAR should be accompanied by simplification of the tax system.
CIOT president, Patrick Stevens said:
“This is all about making the GAAR work and reducing uncertainty for taxpayers, especially businesses. The proposed Advisory Panel is a key feature of the operation of the GAAR. The Government have identified its purpose as being to help taxpayers and HMRC identify the borderline of where the GAAR applies. To achieve this we think it is necessary for it to be genuinely independent, drawing on those with current practical tax experience and with no HMRC representatives.
“Additionally the decisions of the Advisory Panel should be published. There is a need for confidentiality in relation to individual taxpayers but decisions can be safely anonymised. Given the lack of any clearance system, the publication of advisory panel decisions, including dissenting opinions, is particularly necessary to assist taxpayers and their advisers. It is a key part of the process of making the GAAR work and, along with the Panel’s independence, can help avoid damaging uncertainty.”
The Confederation of British Industry (CBI) agree with the two tax bodies regarding the proposed panel which would adjudge whether or not a scheme falls foul of GAAR, voicing their concern that HMRC would act as ‘judge and jury‘.
Last week, Labour MP, Michael Meacher tabled a Private Members Bill in a bid to stop tax avoidance once and for all. Unlike the proposed GAAR, Meachers’ Anti-Avoidance Bill covers VAT and NIC. Meacher claimed it would also clamp down on those who shift income from one tax to another in order to reduce their tax bill.
Mr Meacher said, “George Osborne said in March that he thought tax avoidance was ‘morally repugnant’ but the proposal he has made to tackle it – called a GAAR – is so weak that by the government’s own admission it will have no measurable economic impact.
That’s not what we need now. We need a real anti-tax avoidance measure that will stop this abuse for good.”
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