How the government dodges reform of the tax dodgers
July 2nd, 2012The 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.
July 3rd, 2012 at 6:31 am
You are certainly not the right person to be introducing any proposed legislation on anti-tax avoidance measures. I have rarely read something so poorly researched, ill-conceived and devoid of any link to the rule of law. Apart from that, it is mostly incorrect.
- Take yourself back to 1997 and the Tax Law Review Committee recommendation that the UK introduce a GAAR. The chairman of the committee was Graham Aaronson and the recommendation was rejected by the Labour Government, of which you are a part and have conveniently omitted from your blog. Not a good start really.
- Please clarify what you mean when you say Aaronson is pro tax avoidance industry. Do you have support for such a contention or this is nothing more than meaningless abuse. Why don’t you research his prominent cases, which tend to be in the ECJ?
- As for Aaronson never acting for the Revenue, have you ever heard of the cab-rank principle? If Revenue don’t ask him to appear on their behalf, he can’t act for Revenue! Quite simple.
- Hoffman didn’t kill the Ramsey doctrine. 11 Law Lords did between the McGuckian case and the Barclays Mercantile Business Finance case. You should read these cases as well as MacNiven. Your suggestion that the Law Lords are anti-GAAR is ludicrous.
- There is no foundation for your assertion that Hoffman is opposed to GAAR. Again, just mindless rhetoric. In fact, Hoffman has a history of rigorous application of GAAR in the Hong Kong Court of Final Appeal that has not endeared himself to taxpayers and their advisers.
- What exactly is the tax avoidance industry? Who are they, what do they do that makes them part of that industry? This seems to just be populist nonsense.
- You say: “The Aaronson Group proposed that the tribunal should have 3 members, of whom two should be from the tax avoidance industry …….”
It is clear that you haven’t read the Aaronson Report, which is disappointing. However, to have not the read the Government’s ConDoc is unforgivable. I think I know where you are trying to come from with your “tax avoidance industry” fiction but even how you try to link this to the Advisory Panel (not “tribunal” as you called it – because it isn’t) is beyond me. In fact the ConDoc actually makes it clear that the members are unlikely to be members of the tax profession.
- Finally, I think it is a shame that you waste parliamentary time with this. It is nothing more than gesture politics and will set back the move to have a broad based GAAR or GANTIP (which incidentally was first penned by Judith Freeeman who was a member of the Aaronson committee) introduced in the UK subsequent to the limited GAAR
July 23rd, 2012 at 4:41 pm
IMHO, if the tax system is being manipulated by aggressive tax avoidance schemes, it’s a sign that the government has over-complicated the tax system. Simplification is called for, then we all know what’s got to be paid, who to and when.
Maybe I’m just being too simplistic