2012: The year of avoidance

Robert Lovell
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Over the last year the issue of tax avoidance erupted into a media frenzy and helped move along the development of a general anti-abuse rule (GAAR).

The most noticeable signal of the cultural shift taking place came during the 2012 Budget speech, when George Osborne declared that aggressive tax avoidance was “morally repugnant” and confirmed the preparation of a GAAR for the Finance Bill 2013.

It wasn’t long for this revulsion to spread. Over the months that followed top celebrities, politicians and multinationals were named and shamed for their legitimate tax avoidance arrangements.

Everybody from Jimmy Carr to Prince Charles and global brands such as Amazon and Starbucks were all fair game in the avoidance witch hunt.

Early on The Times led the charge with an investigation into tax avoidance which found more than 1,000 individuals, including celebrities such as Carr, were involved in the Jersey-based K2 scheme. This sparked a huge tax avoidance debate on AccountingWEB about the difference between unethical tax avoidance and legitimate tax planning.

The Times and The Guardian continued with a steady flow of front page tax exposes for readers to pore over.

It came as no surprise to many in the profession that the mainstream media would soon cloud the definitions of tax evasion and tax avoidance.

By the start of September, following a GAAR consultation process, AccountingWEB was referring to the “summer of avoidance”. But the campaign went up another notch when Starbucks, Google and Amazon were hauled in front of the Public Accounts Committee in November for avoiding tax in the UK.

Labour MP Margaret Hodge, chair of the PAC, led the crusade against these multinational companies, who argued they paid the amount of tax they are required to under law. 

After weeks of governmental, media and public pressure, Starbucks announced it would start paying corporation tax in the UK, and to the astonishment of the profession, that it would pay £10m per year over the next two years to HMRC, whether it makes a profit or not.

By the time the Autumn Statement came around in December the Chancellor announced a further £77m of funding for HMRC to expand anti-avoidance and evasion activity.

With the publication of the Finance Bill clauses the following week, the government finally put forward the draft GAAR legislation, which was broadly welcomed by tax experts.

While the political will to tackle tax avoidance remains strong, there are more practical issues to consider, such as whether HMRC resources are best spent on anti-avoidance. There is also concern about whether levelling the playing field will impact on small and medium sized businesses engaged in legitimate tax planning.

In 2011 accountancy and tax went political when tax officials joined the Westminster village and brought a new level of parliamentary scrutiny to tax and accountancy matters. In the past 12 months tax avoidance has risen to the top of the political agenda.

Whether or not HMRC is fulfilling a political agenda here, avoidance is very much in the spotlight and will continue to be a key item on the programme for the year ahead.

Another thing which is certain, the AccountingWEB community will be watching closely and engaging in 2013 to ensure a well-thought through and sensible rule emerges.


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31st Dec 2012 12:23

abuse - somewhere between avoidance and evasion

Not so much "shifting sands" as retrospective shifting of goalposts.

We can look forward to some interesting litigation. What exactly is the position of a director, who is legally bound to act in a company's best interests, if he has voluntarily arranged for it to pay more tax than the minimum due by law? The words "Devil" and "Deep Blue Sea" spring to mind. 

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