Avoidance and the horse trading

SO here we are again discussing the prospect of a general anti avoidance rule (GAAR) for corporate and personal taxes. Exchequer secretary David Gauke yesterday launched a big study to find out whether it could be introduced fairly, and without making the UK business environment look about as hostile as a yard full of rottwielers.

In fact what this issue clearly reveals is that “business” interests now find themselves betwixt and between when it comes to government policy.

Firstly, business is caught between policy which wants to improve things to stimulate economic growth while, elsewhere the government is so strapped for cash it needs to take as much as possible from where it can – the target being companies viewed as avoiding their dues.

Secondly, business, it seems, is now caught between the competing factions of the coalition. On the one hand Tories traditionally sympathetic to business but seeking to hike up university fees and, on the other, Lib Dems suspicious of big business and increasingly disturbed, and disrupted, by the prospect of betraying their manifesto pledge of maintaining fees as they are.

As a result the GAAR looks a little like a sweetner to the Lib Dems for sticking with the uni fee policy.

Oddly, that means the Tories seem willing to trade the support of business for keeping the Lib Dems happy.

The danger for the government is that in horse trading on policy like this they begin to lose sight of the goal and increasingly undermine business confidence. And if confidence is low the investment we need to stimulate the economy and generate the tax revenues to pay off the deficit could be undermined. The government is charting a difficult course.

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