Tuesday, September 11, 2012

A GATAR when a GAAR just won't do

From TJN: The UK is considering a bill to introduce a general anti tax avoidance rule (GATAR) to defend against financial arrangements made with the primary purpose of avoiding tax.  The sponsor of the bill calls tax avoidance "the cancer of British society." The UK has a general anti-avoidance rule (GAAR) already in place, but according to Richard Murphy, who wrote the text of the bill:
It (is) very obvious that they only want to stop the most abusive of tax schemes. There are probably at most a handful a year that will be stopped as a result and since they'll now probably never see the light of day because of the GAAR it is quite possibly true that the government's proposed law might be a massive white elephant in that it might never be used.
The difference between Murphy's proposal and the government's is, as Murphy explains:
Meacher's Bill is broader by design than the government's. It covers VAT and national insurance for a start, almost doubling the value of the taxes that it would cover compared to the government's Bill, which omits both these taxes. 
Secondly, instead of being extremely narrowly focussed, as the government's Bill is, Meacher's is designed to target abuse on a wide range of tax issues. So, for example, it attacks shifting income from one tax to another to reduce the tax paid and it challenges any scheme resulting in tax paid late. It also tackles any scheme that might artificially shift a profit subject to tax out of the UK. In addition if it seems that the wrong person is paying tax on a source of income or that the source of income in question is wrongly described e.g. as investment income when it actually seems to come from a profit or employment, then Meacher's Bill gives HM Revenue & Customs the power to challenge the arrangement.
...It gives the Revenue the right to look at what has really gone on in a transaction, and who really seems to be involved in it, and to then compare that economic reality with the way in which the transaction has been reported for tax (or has not been reported if someone has tried to shift it right out of the UK tax net).
TJN says the bill will most likely get shot down in parliament.  You can track its progress here.

No comments:

Post a Comment