Tax avoidance has reached the very top of the political agenda, with MPs, the Chancellor and the Prime Minister all decrying the immorality of tax avoidance by companies and rich individuals. Yet the government’s proposals for an ‘anti-abuse rule’ – the centrepiece of the government’s strategy for tackling tax avoidance – will have a negligible impact on tax avoidance and would have had little or no impact on the most high profile tax avoidance scandals of 2012.
Avoiding avoidance shows that the government’s proposals for an anti-abuse rule, due to be introduced in the Budget in 2013, would:
- Have had little or no impact on recent tax avoidance scandals involving Starbucks, Amazon, Google, the Student Loans Company, the BBC, the civil service, Jimmy Carr or Take That.
- Fail to collect up to £5.5bn that could be recovered through the introduction of a General Anti-Avoidance Principle aimed at tackling tax avoidance.
- Give a green light to large companies and wealthy individuals to continue avoiding tax.
The government should scrap its proposals for an anti-abuse rule that targets only ‘artificial and abusive’ tax avoidance. Instead it should introduce a General Anti-Avoidance Principle to give HMRC a powerful tool to tackle tax avoidance, and make the UK’s tax system one that is based on fairness and equity rather than on its attractiveness to multinational companies.