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CBI backs GAAR and defends ‘tax management’

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‘Highly abusive’ and artificial tax avoidance schemes that serve no commercial purpose should be weeded out, and the government’s proposed general anti-abuse rule (GAAR) ‘will play an important role in doing so’, the CBI’s Director General John Cridland said yesterday.

The CBI said in February that such a rule should be supported if it could successfully be targeted at ‘preventing abusive arrangements without creating uncertainty in relation to the tax treatment of normal commercial arrangements’.

The government is planning to consult in June on the introduction of a GAAR based on the recommendations made in Graham Aaronson’s report presented to HM Treasury last November.

►UK businesses are ‘perfectly entitled’ to operate in low-tax countries, says CBI

Responsible tax planning

Aaronson said a ‘broad spectrum’ general anti-avoidance rule would not benefit the UK tax system.

‘This would carry a real risk of undermining the ability of business and individuals to carry out sensible and responsible tax planning,’ he said. ‘Such tax planning is an entirely appropriate response to the complexities of a tax system such as the UK’s.’

Aaronson said a moderate rule that did not apply to responsible tax planning but was instead targeted at ‘abusive’ arrangements would be beneficial. It would deter ‘contrived and artificial schemes which are widely regarded as an intolerable attack on the integrity of the UK’s tax regime’.

The CBI now supports the GAAR in principle, Cridland said. A consensus was needed around a GAAR that ‘should not be a catch-all’.

Tax management

Cridland did not mention ‘tax planning’ at all his speech and the phrase did not appear in the CBI’s 20-page report titled ‘Tax and British business: Making the case’, released yesterday at the Policy Exchange in Westminster.

In a section titled ‘Why tax management is neither abuse nor evasion’, the CBI said:

‘There is insufficient public recognition that, barring a few extreme examples, business is trying to comply with a massive number of tax and other regulatory rules. The tax system is very complicated – in fact, the UK has one of the largest tax rulebooks in the world. Businesses therefore need to employ experts to ensure that they follow all the rules and take advantage of any tax reliefs available to them. This is known as tax management ...’

Aaronson did not refer to ‘tax management’ and use of the term may reflect the fact that ‘planning’ has become tainted.

Some critics regard ‘planning’ as a euphemism for avoidance. Private Eye has said a general anti-abuse rule would not touch ‘big-time offshore avoidance’ which was considered ‘mere planning’.

A CBI spokesman told Tax Journal today: ‘We regard the terms “tax management” and “responsible tax planning” as broadly interchangeable.’