Charge for GAAR clearance system, Lords told

ANY CLEARANCE SYSTEM for the general anti-abuse rule (GAAR) should be paid for by those running the tax schemes going through it, members of the House of Lords Economics and Finance Bill 2013 Sub-Committee were told.

A clearance system would allow for a broader scope than the rule – which will come into force over the summer once it receives royal assent – is currently designed to have.

Evidence was provided to the committee by CIoT president Patrick Stevens, institute colleague Bill Dodwell and Tax Research UK founder Richard Murphy.

Murphy, the keenest proponent of such a clearance system, told lords that charging would cover the cost for HM Revenue & Customs officers to analyse the schemes.

Dodwell, though, warned that doing so may divert HMRC staff from other, more important, activities.

The committee had previously convened on Monday, with the original author of the GAAR recommendations, Graham Aaronson QC, warning the rule would not act as a cure-all against tax abuse, and should be treated instead as an additional weapon in HMRC’s arsenal.

Other tax regimes and competition make it “inevitable companies will locate activities in countries which suit them best”, he said.

Those sentiments were echoed by Murphy and Stevens, who warned the rule would not stop multinationals using transfer pricing – the intra-company trade of goods and rights across international borders – to ensure their affairs are tax-efficient.

The government’s enquiries into tax avoidance will continue on 31 January, when the Public Accounts Committee will hear from representatives of the Big Four.

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