Don Foster MP

News

A new way to tackle unfair tax avoidance

December 7, 2023 by admin in Don in Parliament, News

Earlier this week I signed EDM 2501 sponsored by Liberal Democrat MP for Bristol West, Stephen Williams, that calls for a general anti avoidance rule for taxation. We have lots of specific anti-avoidance legislation but people still find loopholes. Most countries have a general anti-avoidance rule but the UK has never had one. Accordingly, I want us to support Stephen in pushing for this to be introduced.

Specifically, the EDM states:

That this House notes the widespread public concern about the extent of tax avoidance and evasion by individuals and corporations; further notes that while evasion is illegal, taxes can be avoided by schemes that are contrived in their nature or by arrangements that are artificial and thus far removed from the responsible tax planning measures provided for by Parliament; believes that the ever-growing expansion of anti-avoidance measures has not eliminated the scope for exploitation of loopholes; further notes the publication of the report by Graham Aaronson QC outlining the case for the introduction of a general anti-avoidance rule in the UK; and urges HM Treasury to bring forward legislation within the next Finance Bill for the introduction of such a rule.

Below are some of Stephen’s further thoughts on the issue. You can read the full blog here:

“We all know that times are tough for Government finances. In order to bring Britain’s enormous budget deficit under control there has to be a mixture of increasing tax revenue and restricting the growth of spending. Tax revenues are most easily increased by rises in the rates of various taxes. So the Coalition Government has raised the rate of VAT to 20%, implemented a 50% tax rate on incomes above £150,000 and also imposed 2% national insurance contributions on salaries and bonuses above £42,500.”

“We now have an incredibly complex tax code. There are lots of tax reliefs to incentivise people and businesses to structure their personal finances (savings, pensions, etc) or business planning (capital investment, research, etc) in a way that is for the greater good of society. But to stop abuse each relief is accompanied by anti-avoidance rules that try to second guess all potential loopholes. It hasn’t worked and we need to try a new approach….”

“The Liberal Democrats promised in our 2010 manifesto that we would tackle tax avoidance problems. The Coalition Agreement provided for a study into what’s called a General Anti-Avoidance Rule, a rather ugly acronym of GAAR. The Treasury duly commissioned top tax barrister Graham Aaronson QC to set up an expert group to make a recommendation on whether the UK should have a GAAR. The basic point of a GAAR is that it would be explicitly stated that personal and business arrangements that are set up purely to avoid tax and for no legitimate commercial purpose, would not be considered legal tax avoidance. Essentially they would be irresponsible tax planning bumping right into illegal tax evasion.”

“Aaronson has now published his report and I met him to discuss it last week. He recommends legislation for a GAAR to cover initially income taxes (incl NIC), capital gains tax, corporation tax and petroleum revenue tax. It would be a shield against future tax avoidance schemes.”