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GAAR – It is a tale told by an idiot, full of sound and fury, signifying nothing

GAAR – It is a tale told by an idiot, full of sound and fury, signifying nothing

Don’t know about you but I usually have that optimistic hope at this time of the year that things are going to get better. Possibly fuelled by an excess of several Christmas spirits, but mainly on the basis that they couldn’t get much worse. But even I might struggle to feel optimistic about 2012, even if Mother Nature keeps out of it and doesn’t produce any more tsunamis and earthquakes. The economy isn’t what you would call robust; although ours is looking healthier than many thought it would, it’s still not that good and badly threatened by our continental friends and their strange ideas on fiscal unity.

But there are always glimmers of hope from which to take comfort.

The fragrant Ms Primarolo is standing down at the first opportunity. St Vince of Cable sounds like he’s been put back in his box. Hartnett is retiring. Moribund and Balls seem to be losing everyone’s respect, even their own supporters’. And the Deputy PM has come out against tax avoidance.

Actually that last one is quite amusing if you think about it. It’s come about because HMRC have been caught out rather badly; cutting deals with companies with no obvious justification and thereby not collecting some £25bn in taxes owed. You may recall me writing about Goldman Sachs and their interesting approach to penalties, a position supported against all reason by a certain Mr Hartnett. Or even my much earlier railing against the shopkeeper Mr Green, paying a personal dividend some £500 million in excess of his net profits and, just to rub salt into the wound, paying no tax at all since it wasn’t actually his dividend, it was the Monegasque Mrs Green’s.

So eventually the slumbering giant awoke and took notice. Which is nice…

However you have to say that, as usual, said slumbering giant has once again failed to understand one of the basic drivers of commerce: if there is a small pinhole by which you can save even a little money, someone will engineer a coach and horses to drive through it.

Nevertheless, Corporal Clegg has started making serious noises about attacking unacceptable avoidance. He wants to see a general anti-avoidance rule to prevent corporations employing armies of lawyers to find ways to avoid paying taxes.

So near and yet so far.

The problem is not people avoiding taxes. The problem is that there are so many complications and exemptions and offsets in tax law that finding loopholes is actually quite simple. The problem is that most of HMRC don’t actually understand the laws they are trying to enforce and when they do, their own management decides not to bother enforcing them. The problem is that any such rule will have to be so loosely framed that it will more than likely impact a whole raft of people that it was never meant to; people who don’t have armies of lawyers on tap and who therefore will end up paying taxes they probably don’t owe while the real culprits take no notice.

When will it dawn on our political masters that more and more rules are not the answer? We need fewer rules, with clearer definitions of how they apply. We need an enforcement body that knows what it’s doing and how to do it. And we need politicians who understand that avoidance is legal and if you want to stop it you make it illegal so it can be correctly described as evasion. The problem is a lack of clarity of purpose. The problem with a general anti-avoidance rule was in fact neatly summarised by Macbeth, “It is a tale told by an idiot, full of sound and fury, signifying nothing.”

Anyway, have a Happy New Year. Fingers crossed…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: ST027: Figure 12.1 by Rosenfeld Media

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