Broader GAAR would cause “uncertainty”, Lords told

Broader GAAR would cause “uncertainty”, Lords told

Wider GAAR would give HM Revenue & Customs too much discretion the Lords' Economic Affairs and Finance Bill Sub-Committee is told

A MORE WIDELY-TARGETED general anti-avoidance principle would create “uncertainty”, provide HM Revenue & Customs too much discretion and divert its resources away from other activities, Lords have been told.

Appearing before the Economic Affairs and Finance Bill Sub-Committee, treasury director for international business tax Mike Williams said a wider rule – such as the one put forward by Labour MP Michael Meacher that would address national insurance and VAT – would take in too many ordinary tax planning measures.

The committee heard last week from Tax Research UK founder Richard Murphy that a clearance system for the GAAR should be imposed, with its administration paid for by those whose schemes are to be examined. That, too, would divert HMRC’s attention away from other matters, Lords heard.

As in previous hearings, the committee heard the GAAR is very unlikely to affect what Lord Livesey described as “the despicable schemes which have had the public spitting into their lattes” in a thinly-veiled swipe at the use of transfer pricing by multinationals such as Starbucks.

There is “no magic bullet” to recover profits kept offshore, warned Williams. “You can’t use GAAR to re-write rules allocating profits between countries”, he said.

Williams – along with fellow witness HMRC director for corporate tax, international anti-avoidance Judith Knott – echoed previous submissions that GAAR would be “just one of a range of methods open to HMRC” to tackle tax avoidance and should not be viewed as a cure-all.

Countries must co-operate in order to address multinational tax avoidance, they said.

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