That at least is the conclusion to be drawn from the government's proposals to clamp down on tax avoidance (a perfectly legal activity) by introducing a general anti avoidance rule (GAAR). GAAR was considered by the previous Labour administration. However, it was decided that it would be too expensive and complex to administer.
Critics note that the effects of GAAR will be most keenly felt by small and medium sized business.
Accountancy Age quote Andrew Jupp, head of tax at Haysmacintyre:
"It is unnecessary and unwelcome, and will introduce yet more uncertainty into the tax system. Unless it is coupled with a vast range of pre-transaction approvals it will stifle businesses ability to operate and make sensible commercial decisions.
Whilst the largest British companies might be able to cope with a GAAR, I cannot see how the smaller businesses, which are the lifeblood of the UK economy, will manage. These businesses constantly tell us that they want less red tape, not more."
James Bullock of McGrigors said:
"The problem is that there will inevitably be a situation - probably many situations - where commercial pressures mean that transactions have to be completed before specific HMRC clearance can be obtained confirming that they do not fall foul of a GAAR.
You will then have precisely the situation that applies at the moment - HMRC challenging the tax treatment of transactions after the event, on the basis that the GAAR applies. Taxpayers will oppose these challenges and the whole thing will end up being interpreted by the Courts - just as happens at the moment".
GAAR will simply push companies to move out of the country and reduce the tax take, thus being counterproductive to the economic well being of the country and the coffers of the government so hungry for cash.
Tax does have to be taxing.
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