CBI fight-back on business tax brings GAAR warning

CBI, the employers group, took the tax debate to the public yesterday with the launch of a document that seeks to explain why corporate tax is complicated and that “British business pays its way”.

UK companies contribute £163bn in taxes, more than a quarter of total tax revenues of £551bn, according to the CBI research document, Tax and British Business: Making the case.

The organisation is trying to counter public perception that companies use improper tax avoidance schemes to reduce their tax bills.

The aim is to set out the distinction between “legitimate, necessary tax management” and “abusive arrangements to avoid tax”.

Director-general John Cridland said: “Frankly, I don’t recognise the notion that Her Majesty’s Revenue and Customs is a soft touch. For far too long business has been slow and perhaps even reluctant to enter the public policy debate on tax policy. That needs to change.”

Cridland argued it was actually millionaires and not companies who were at fault for using abusive schemes. “The majority of abusive schemes involve attempts, I think, by high net worth individuals to minimise their tax burden rather than by corporate Britain,” he said.

In a panel discussion that took place at the launch, there was a warning that the forthcoming general anti-abuse rule (GAAR) may eventually suffer from public criticism because of an incorrect perception that it’s not working.

Panellist John Whiting, (pictured) tax director at the Office of Tax Simpliciation, pointed out that “The GAAR is not going to hit what the public think of as avoidance.

“The fear is that perhaps in two or three years’ time, there could be a backlash that the GAAR has not met some of the publicly expressed concerns and therefore there is a risk that “some of the safeguards that have been built into it are suddenly taken away.”

Whiting added that the answer was to “keep making the case and explaining that what the public thinks is avoidance is not necessarily things that are illegal, as they are portrayed”.

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