By Chas Roy-Chowdhury, head of taxation, ACCA
In the past week I have given evidence at two committees in the Houses of Parliament, discussing the GAAR and the tax conduct of banks.
The House of Lords Economic Affairs Finance Bill Sub-Committee spoke about plans to introduce the General Anti-Abuse Rule later this year, as a means to combat tax abuse.
There is still general confusion between tax avoidance and tax evasion – put simply, avoidance is legal, evasion is illegal.
We have been saying for some time that a General Anti-Abuse Rule is not needed because genuine tax abuse can be caught through the regulations we already have in place to combat it.
If businesses are not paying enough tax, this doesn’t mean they are abusing the system and so a GAAR would not be appropriate.
The tax system needs to be looked at. The taxpayers need to understand fully how much tax they should be paying. A simple tax system needs to be put in place so that everyone involved in the tax paying/advising process knows exactly the right calculations and no mistakes can be made.
We were one of the first to put forward the idea of a Tax Policy Committee which essentially the Government took on board and created the Office of Tax Simplification (OTS). We think the OTS has done a sterling job and should now be expanded significantly and its independence and pro activity should now be guaranteed under statute.
I also gave evidence at the Parliamentary Commission on Banking Standards Joint Committee, which was a panel discussing banking tax practices.
Having a special tax regime for banks is not the best way forward to get businesses to adhere to a particular framework of doing things.
In both cases it seems the answer is a simpler tax system so everyone can understand exactly what they need to pay and cannot get into any legal difficulties without realising it. It would also reduce the ability, or the ‘want’ to ‘tax plan’. If the system is complex then advisers and intermediaries can, and indeed must, be aware of all the alternatives within it.
Let’s see what the Government’s plans will do.