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GAAR panelists on Radio 4

A fascinating discussion on tax avoidance and, in particular, prospects for a general anti-avoidance rule (GAAR), took place on last week's Unreliable Evidence on Radio 4. You can listen to it in full by clicking here.

The show featured Graham Aaronson QC, chairman of the Government's panel studying how a GAAR could be framed, and two of his panel members, Lord Hoffman and Professor Judith Freedman, plus Steve Edge of Slaughter and May. Clive Anderson as usual presided over the discussion.

The panel explored a number of topical issues ranging from residence and non-doms to extra-territorial business taxation and relief on investment in films. There was a strong focus on the importance of the rule of law in determining tax obligations, from Lord Hoffman in particular.

Clive Anderson observed that a window tax was a historic target for tax avoidance when a tax designed to enable the Government to tax according to the size of the house was avoided by people bricking up their windows.

Judith Freedman noted the existing targeted anti-avoidance provisions, of which there are more than 300.

Graham Aaronson agreed with Clive Anderson's suggestion that one intention of a GAAR would be "releasing a lot of people, at the moment engaged in devising schemes, and they could do other work... devising new products or new ways of selling them, or adding to the sum of human wealth in different ways".

Steve Edge said that, if you have a GAAR, "an awful lot depends on the good sense of the people who apply it, and it shouldn't be used simply to remedy defects in other legislation".

Judith Freedman said a GAAR would be a "useful tool" but also recommended moving towards more principles-based legislation and getting more expert tax advice for Parliament and Government.

Lord Hoffman suggested there is a lack of trust at the Revenue about what Judges might do.

Graham Aaronson concluded by taking a comment of Steve Edge that a GAAR could be seen as a 'nuclear weapon' and saying "that is not any GAAR which our committee would be interested in". But, continuing on the theme, he added:

"What we are interested in is seeing if we can develop an anti-missile system with the missiles being these egregious tax schemes or wholly artificial... We are seeing whether it's possible to develop something like that, which could then be effective, it would also be a deterrent, people won't bother to fire the missiles, and that's really what we want to stop. And once you stop people firing the missiles then the draftsmen can get on with the business of drafting legislation without thinking of all sorts of exploitation arrangements that people might enter into. We could end up with a much simpler and better expressed tax code. That's the objective - whether it's achievable I don't know. We have several months of work before we can come to a decision on that."

The GAAR study group is due to report by the end of October this year.

The CIOT's comments on a GAAR can be read here.

George Crozier
External Relations Manager
Chartered Institute of Taxation
Tuesday 12 April 2011


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