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UK GAAR Not Fit For Purpose, TUC Warns

by Robert Lee, Tax-News.com, London

06 December 2013


The UK Government's General Anti-Abuse Rule (GAAR) is so poorly designed that it will allow 99 percent of tax avoidance to continue, the Trades Union Congress (TUC) has alleged.

A TUC briefing published this week calls on the Coalition to scrap the GAAR, and on Chancellor George Osborne to introduce tougher new regulations in Thursday's Autumn Statement. The Treasury estimates that the GAAR could raise between GBP40m and GBP60m (USD65.6m) annually, but the TUC is concerned that this figure represents just 0.2 percent of the GBP25bn lost to the Exchequer each year through tax avoidance.

The briefing points to three key weaknesses in the rules. According to the TUC, the proposed "double reasonableness" test is insufficiently stringent, and the lack of imposable penalties for the use of a loophole under investigation by the GAAR will mean that there are no disincentives for engaging in such activity. The impartiality of the planned panel of experts, which will agree on new anti-avoidance regulations, is also called into question, with the TUC warning that panel members will be drawn from tax firms or the tax departments of businesses.

TUC General Secretary Frances O'Grady said: "The Chancellor has the perfect opportunity this week to announce a proper crackdown on tax dodging. He should beef-up the anti-abuse rule so that it closes down loopholes and raises billions, not millions."

TAGS: compliance | tax | business | tax compliance | tax avoidance | revenue guidance | United Kingdom | enforcement | ministry of finance | tax authority | legislation | tax planning | France | HM Revenue and Customs (HMRC) | tax breaks | revenue statistics | standards | regulation | penalties | HM Revenue and Customs (HMRC) | legislation amendments

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