The government has abandoned a consultation – due to close in less than a fortnight – on proposed measures to counter tax avoidance ‘exploiting’ double tax treaties.
Specific arrangements that ‘clearly seek to abuse provisions in a DTA’ will still be challenged, David Gauke said this morning in a written ministerial statement.
'The quick action of the Treasury, in terminating this consultation before it reached the submission deadline, shows the government’s new consultation process is working.'
Chris Sanger
The Exchequer Secretary to the Treasury said responses received so far had made it clear that the proposed legislation, as drafted, could cause ‘significant uncertainty for compliant UK businesses and overseas investors about its intended scope and its practical effect’.
Relief
Ernst & Young welcomed the cancellation of ‘potentially far reaching changes that could have undermined the UK's investment in over 120 double tax treaties’.
Chris Sanger, the firm’s Head of Tax Policy, said today’s announcement would be ‘greeted with a sigh of relief’.
‘Had the government’s proposals gone ahead, UK competitiveness would have been eroded. It would have hit commercial transactions by restricting access to funding markets and hiked up the costs of investing into the UK,’ he said.
‘The quick action of the Treasury, in terminating this consultation before it reached the submission deadline, shows the government’s new consultation process is working. True consultation involves listening to responses and, in this case, it is clear that the government has understood the concerns and acted accordingly.
‘The consultation framework launched by the Treasury sets out a five stage process and yet this consultation was launched at stage three, omitting the two vital policy design stages. These early stages help to ensure that any changes are focused and proportionate. Applying this process more rigorously would help avoid needless consultation and reinforce the UK's aim of once again making the tax system an asset for attracting business to the UK.’
Peter Cussons, Tax Partner at PwC, said the UK’s tax treaty network, the largest in the world, was a significant asset.
‘We were concerned, along with others, that introduction of such a broadly drafted domestic tax treaty override would have led to significant uncertainty and consequently lower investment in and from the UK and goes against the generally accepted international tax law principle of treaties taking precedence over domestic provisions.
‘It is reassuring that the government have recognised this concern so swiftly. We think any government concerns over the use of treaties are best addressed via bi-lateral anti-avoidance provisions, rather than via domestic treaty override.’
Commitment
Today’s decision reaffirmed the government’s commitment to open and transparent consultation, Gauke said.
‘The government’s approach set out in their tax consultation framework has been widely welcomed by business and others as providing a much improved basis for developing new legislation. If the government conclude in the future that alternative approaches for legislating against treaty abuse are necessary, they will consult on these alternatives in line with the tax consultation framework.’
The government has abandoned a consultation – due to close in less than a fortnight – on proposed measures to counter tax avoidance ‘exploiting’ double tax treaties.
Specific arrangements that ‘clearly seek to abuse provisions in a DTA’ will still be challenged, David Gauke said this morning in a written ministerial statement.
'The quick action of the Treasury, in terminating this consultation before it reached the submission deadline, shows the government’s new consultation process is working.'
Chris Sanger
The Exchequer Secretary to the Treasury said responses received so far had made it clear that the proposed legislation, as drafted, could cause ‘significant uncertainty for compliant UK businesses and overseas investors about its intended scope and its practical effect’.
Relief
Ernst & Young welcomed the cancellation of ‘potentially far reaching changes that could have undermined the UK's investment in over 120 double tax treaties’.
Chris Sanger, the firm’s Head of Tax Policy, said today’s announcement would be ‘greeted with a sigh of relief’.
‘Had the government’s proposals gone ahead, UK competitiveness would have been eroded. It would have hit commercial transactions by restricting access to funding markets and hiked up the costs of investing into the UK,’ he said.
‘The quick action of the Treasury, in terminating this consultation before it reached the submission deadline, shows the government’s new consultation process is working. True consultation involves listening to responses and, in this case, it is clear that the government has understood the concerns and acted accordingly.
‘The consultation framework launched by the Treasury sets out a five stage process and yet this consultation was launched at stage three, omitting the two vital policy design stages. These early stages help to ensure that any changes are focused and proportionate. Applying this process more rigorously would help avoid needless consultation and reinforce the UK's aim of once again making the tax system an asset for attracting business to the UK.’
Peter Cussons, Tax Partner at PwC, said the UK’s tax treaty network, the largest in the world, was a significant asset.
‘We were concerned, along with others, that introduction of such a broadly drafted domestic tax treaty override would have led to significant uncertainty and consequently lower investment in and from the UK and goes against the generally accepted international tax law principle of treaties taking precedence over domestic provisions.
‘It is reassuring that the government have recognised this concern so swiftly. We think any government concerns over the use of treaties are best addressed via bi-lateral anti-avoidance provisions, rather than via domestic treaty override.’
Commitment
Today’s decision reaffirmed the government’s commitment to open and transparent consultation, Gauke said.
‘The government’s approach set out in their tax consultation framework has been widely welcomed by business and others as providing a much improved basis for developing new legislation. If the government conclude in the future that alternative approaches for legislating against treaty abuse are necessary, they will consult on these alternatives in line with the tax consultation framework.’
