Less than a month after the launch of the new Office of Tax Simplification, we're seeing renewed speculation regarding the introduction of a General Anti-Avoidance Rule (GAAR) or General Anti-Avoidance Principle (GAAP).
Described as a 'super law' by some, the objective of GAAR / GAAP is to prevent highly paid tax lawyers and accountants coming up with complex schemes to subvert the intention, if not the letter, of UK tax law to secure tax advantages for their wealthy clients.
As Nizar Manek points out, the main argument employed by opponents of GAAR / GAAP is that it makes tax law 'uncertain'.
Here's Deloitte's view on GAAR / GAAP:
"Where implemented in other countries .. such rules have resulted in enormous uncertainty as to whether or not transactions are caught by such rules.
"We suspect that upon review the new government will likely conclude, in line with prior governments, that such a rule would not be advisable."
Manek tackles the opposition to GAAR / GAAP head on.
He quotes Upper Tax Tribunal Judge John Avery Jones as saying that "tax legislation is now more than four times as long as it was 25 years ago, but I do not believe it has achieved any more certainty, rather the reverse".
Manek continues: "If properly crafted (with an adequate clearance mechanism and appeals procedure), the GAAR could give the courts clear constitutional authority to strike down unacceptable tax avoidance schemes -- conferring upon judges a necessary interpretative power, beyond mere formalism in statutory interpretation. Such a principles-based tax regime could reconfigure the rules of 'corporate morality', and lessen chances for the tax planning industry to exploit imperfections in tax law's spider web."
Manek concludes: "Fairness must precede certainty: certainty is not necessarily a prerequisite to fairness. A change in the rules of the game is long overdue: without it, 'the logic of fiscal austerity', as Paul Krugman puts it in a recent New York Times op-ed, will continue -- perverse and misguided."
- In support of a "super law" to clamp down on tax avoidance(Reuters)
- New era in fight against tax avoidance? (The Solicitor)
- What next in the UK in terms of anti-avoidance -- a general anti-avoidance provision? (KPMG)
- The battle over a General Anti-Avoidance Principle begins (Tax Research UK)
- Tax law news (The Solicitor)
- Tax law (Findlaw.co.uk)
- Tax law Q&A (Community)
- Find a tax lawyer (Contact Law)