The Prime Minister said at last week’s PMQs (col. 299) that “It is this government who are cracking down on aggressive and illegal tax avoidance and tax evasion”. Great rhetoric, but the facts tell a very different story. What the government have announced is that they will introduce a general anti-avoidance rule (GAAR) next year, though the continuous revelations of abusive tax avoidance that keep pouring out would suggest it should be dealt with urgently, not leisurely, and introduced now as an amendment to this year’s Finance Bill or even by accepting my General Anti-Avoidance Principle (GANTIP) private member’s bill currently before the House. But the timing, if disappointing, is not the real point. Rather it’s that the government’s GAAR is being drawn up in a manner designed to make sure it will have zilch effect.
The government commissioned the Aaronson Group to advise on construction of a GAAR, and the Group reported last November. It makes interesting reading. Right at the start of the report it states that a broad anti-tax avoidance rule is not necessary or desirable. It should only apply in the most extreme cases, so that for the overwhelming majority of cases tax planning should continue to operate as before. One might be forgiven for thinking that the flat rejection of their remit was an odd way for Aaronson to begin, but of course he was chosen precisely to do that. As Richard Murphy, the tax expert in the Tax Justice Network has pointed out, he has only ever represented companies or persons against HMRC; he has always acted pro-tax avoidance industry, never pro-tax. Appointing him was rather like putting the poacher in charge of the grouse moors.
Then Aaronson chose as his adviser Lord Hoffman, the man who killed the Ramsay principle (i.e. GANTIP) in the Westmoreland case in 2001. In other words, Aaronson chose Hoffman to advise on GAAR because he knew he opposed it.
The Aaronson-Hoffman cabal then had a further trick up their sleeve. The report recommended that if a GAAR were accepted at all, the HMRC should be obliged to consult and get the approval of a tribunal before it could be used against a particular company or person. That is an extraordinary proposal – that the government’s official revenue collection agency should have to get permission from an external body before it could exercise its legal powers.
But it gets worse. The Aaronson Group proposed that the tribunal should have 3 members, of whom two should be from the tax avoidance industry – an open and shut case that the GAAR will gather dust on the shelf. The government have now said they are minded to accept the Aaronson proposals in full. So Cameron’s ‘cracking down on aggressive tax avoidance’ turns out to be elaborately constructing a paper aeroplane in the safe knowledge that it will never fly – a classic Cameroon device.