Richard Murphy told peers last week that the proposed GAAR was ‘a very narrow piece of work’
Two prominent campaigners against tax avoidance, Richard Murphy and David McNair, have been appointed to the interim advisory panel overseeing development of HMRC’s guidance on the proposed general anti-abuse rule (GAAR).
The government announced last November that Graham Aaronson, the barrister whose study group reported to HM Treasury on the merits of a general anti-avoidance rule, would work with representatives of business and the professions to ‘ensure that an appropriate spread of interests is involved including business, tax advisers, and wider taxpayer interests’.
Aaronson has said that his job in chairing the interim advisory panel would be ‘to ensure that [it] will not cave in to public pressure and that the notes which it must approve will make the GAAR an effective weapon to deter and counteract abusive schemes, while not materially affecting reasonable tax planning’.
Writing in Tax Journal last month, Aaronson noted that Murphy, director of Tax Research LLP, was saying that the proposed GAAR did not go ‘nearly far enough’ while tax professionals were ‘praying that the GAAR legislation and the all-important guidance notes will hold the sensible line which the study group drew’.
McNair is a co-author of the report published at last week’s launch of the ‘Enough Food for Everyone IF’ campaign.
Bill Dodwell, head of tax policy at Deloitte, will also sit on the interim advisory panel. A House of Lords sub-committee on the Finance Bill heard evidence from Murphy last week alongside Dodwell and Patrick Stevens, who were representing the Chartered Institute of Taxation.
‘Abusive tax schemes bring the tax system into disrepute,’ Dodwell said last June as the government launched a consultation on the proposed GAAR. He added: ‘A range of approaches to cut out tax avoidance is best. The structure of the law and [existing] targeted anti-avoidance rules, supported by HMRC’s compliance activities, and ultimately decisions of the tax tribunal are the best way to limit planning. However, a narrowly-targeted GAAR could have a limited role to play.’
During last week’s evidence session, Lord Wakeham asked Murphy and Dodwell to describe the tax arrangements that they considered to be captured by the proposed GAAR.
Dodwell said: ‘I think that if an individual in particular tries to enter into an arrangement with little if any commercial or economic consequence beyond a tax saving, then I think they will find themselves straight in the compass of … this limited anti-abuse rule.’
He added: ‘I will have to exclude inheritance tax from that because, obviously, giving one’s assets away is a more complex thing to put in that commercial context. But, if you are dealing with business life, the loss generation schemes that we have seen, I would expect, in many cases would be caught by an anti-abuse rule once it is enacted.’
Murphy replied: ‘I think that that is about as far as this GAAR is going to go. It is what this GAAR is meant to do. Very specifically it says that this does not relate to normal commercial transactions whether they are abusive or not. What we do know with absolute certainty is that this GAAR would not, for example, tackle any of the abuse that is being discussed with regard to Google, Amazon and Starbucks, which the public accounts committee looked at, and which is clearly seen to be common-place in its structuring. It is not intended to challenge a whole host of other arrangements which are now normal in business but which, none the less, to most people on the Clapham omnibus, would appear abusive. But this is not going anywhere near those.’
Murphy concluded that the GAAR was ‘a very narrow piece of work’.
Google, Amazon and Starbucks have defended their tax arrangements, stressing that they have acted within the rules set by politicians. Many tax professionals regard those arrangements as normal tax planning, within national laws and OECD transfer pricing guidelines.
However, there is a growing acceptance among tax experts and business leaders that changes need to be made to the corporation tax system to deal with digital business and the impact of globalisation.
This week Mark Otty, Ernst & Young’s area managing partner for Europe, the Middle East, India and Africa, told the Daily Telegraph: ‘The only way you can resolve this issue is through a legal code. I don’t see how you can have any assessment on payments of tax other than what is in the statute. The simplest solution is to stop banging on about morality and change the law.’
Responding on his blog today, Murphy said Otty had ignored a ‘moral obligation imposed by [company] law on directors to use their best judgement on the issue’.
Last Friday Murphy said he had undertaken to offer his best professional judgement to the interim advisory panel: ‘If, as I think, the currently proposed GAAR is an important first step on the way to a much better general anti-avoidance principle, then it is my wish that this new GAAR work as well as is possible, whatever reservations I have about it in its current form.’
A second consultation closes on the GAAR closes on 6 February.
GAAR interim advisory panel
These interim appointments will end on 31 March:
Aaronson, Dodwell, Edge and Lagerberg are members of Tax Journal’s editorial board.
Richard Murphy told peers last week that the proposed GAAR was ‘a very narrow piece of work’
Two prominent campaigners against tax avoidance, Richard Murphy and David McNair, have been appointed to the interim advisory panel overseeing development of HMRC’s guidance on the proposed general anti-abuse rule (GAAR).
The government announced last November that Graham Aaronson, the barrister whose study group reported to HM Treasury on the merits of a general anti-avoidance rule, would work with representatives of business and the professions to ‘ensure that an appropriate spread of interests is involved including business, tax advisers, and wider taxpayer interests’.
Aaronson has said that his job in chairing the interim advisory panel would be ‘to ensure that [it] will not cave in to public pressure and that the notes which it must approve will make the GAAR an effective weapon to deter and counteract abusive schemes, while not materially affecting reasonable tax planning’.
Writing in Tax Journal last month, Aaronson noted that Murphy, director of Tax Research LLP, was saying that the proposed GAAR did not go ‘nearly far enough’ while tax professionals were ‘praying that the GAAR legislation and the all-important guidance notes will hold the sensible line which the study group drew’.
McNair is a co-author of the report published at last week’s launch of the ‘Enough Food for Everyone IF’ campaign.
Bill Dodwell, head of tax policy at Deloitte, will also sit on the interim advisory panel. A House of Lords sub-committee on the Finance Bill heard evidence from Murphy last week alongside Dodwell and Patrick Stevens, who were representing the Chartered Institute of Taxation.
‘Abusive tax schemes bring the tax system into disrepute,’ Dodwell said last June as the government launched a consultation on the proposed GAAR. He added: ‘A range of approaches to cut out tax avoidance is best. The structure of the law and [existing] targeted anti-avoidance rules, supported by HMRC’s compliance activities, and ultimately decisions of the tax tribunal are the best way to limit planning. However, a narrowly-targeted GAAR could have a limited role to play.’
During last week’s evidence session, Lord Wakeham asked Murphy and Dodwell to describe the tax arrangements that they considered to be captured by the proposed GAAR.
Dodwell said: ‘I think that if an individual in particular tries to enter into an arrangement with little if any commercial or economic consequence beyond a tax saving, then I think they will find themselves straight in the compass of … this limited anti-abuse rule.’
He added: ‘I will have to exclude inheritance tax from that because, obviously, giving one’s assets away is a more complex thing to put in that commercial context. But, if you are dealing with business life, the loss generation schemes that we have seen, I would expect, in many cases would be caught by an anti-abuse rule once it is enacted.’
Murphy replied: ‘I think that that is about as far as this GAAR is going to go. It is what this GAAR is meant to do. Very specifically it says that this does not relate to normal commercial transactions whether they are abusive or not. What we do know with absolute certainty is that this GAAR would not, for example, tackle any of the abuse that is being discussed with regard to Google, Amazon and Starbucks, which the public accounts committee looked at, and which is clearly seen to be common-place in its structuring. It is not intended to challenge a whole host of other arrangements which are now normal in business but which, none the less, to most people on the Clapham omnibus, would appear abusive. But this is not going anywhere near those.’
Murphy concluded that the GAAR was ‘a very narrow piece of work’.
Google, Amazon and Starbucks have defended their tax arrangements, stressing that they have acted within the rules set by politicians. Many tax professionals regard those arrangements as normal tax planning, within national laws and OECD transfer pricing guidelines.
However, there is a growing acceptance among tax experts and business leaders that changes need to be made to the corporation tax system to deal with digital business and the impact of globalisation.
This week Mark Otty, Ernst & Young’s area managing partner for Europe, the Middle East, India and Africa, told the Daily Telegraph: ‘The only way you can resolve this issue is through a legal code. I don’t see how you can have any assessment on payments of tax other than what is in the statute. The simplest solution is to stop banging on about morality and change the law.’
Responding on his blog today, Murphy said Otty had ignored a ‘moral obligation imposed by [company] law on directors to use their best judgement on the issue’.
Last Friday Murphy said he had undertaken to offer his best professional judgement to the interim advisory panel: ‘If, as I think, the currently proposed GAAR is an important first step on the way to a much better general anti-avoidance principle, then it is my wish that this new GAAR work as well as is possible, whatever reservations I have about it in its current form.’
A second consultation closes on the GAAR closes on 6 February.
GAAR interim advisory panel
These interim appointments will end on 31 March:
Aaronson, Dodwell, Edge and Lagerberg are members of Tax Journal’s editorial board.
