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Will GAAR simplify UK tax or just make things worse?

Tax avoidance is a serious problem in the UK, especially when it comes to multinationals, but is the new General Anti-Abuse Rule going be a help or a hindrance?

Much of the problem is that the tax system here at home is a right mess, and it’s something that George Osborne referenced several times in his Budget this past week. Things need to be simplified, and the Government seems to think that introducing GAAR will be a proper move towards those goals, but industry experts are most certainly torn on whether or not GAAR is going to simplify things or if they’re just going to put the kind of red tape in place that will confound contractors and small businesses while not actually making a difference when it comes to the true perpetrators of tax avoidance in the UK: multinationals that shunt their pre-tax profits overseas such as Starbucks, Google, and Amazon.

Everyone needs to pay their fair share to the taxman – there’s certainly no one arguing against that. GAAR is, in spirit, supposed to soothe Brits finding it hard to make ends meet by reassuring hem that HMRC is doing it level best to collect the taxes owed by anyone engaging in tax avoidance, thus providing more revenue for the Government to provide aid in the form of schemes and programmes to help fund the economic recovery, but just how effective is GAAR going to be towards these goals in the end?

Bad news is that no one truly knows how easy – or hard – it’s going to be to deal with GAAR at the moment, as this is certainly new ground being broken. If these new rules turn out to be not restrictive enough, it’s not going to make a lick of difference in catching anyone particularly adept at navigating tax loopholes – and let’s face it, most contractors and SME business owners don’t have the type of accounting expertise at their disposal to do a good job of that, unlike multinationals who can afford to throw shedloads of time and money at their accountancy departments in order to get results. Meanwhile, if GAAR is too tough, there are some real fears that these same multinationals will exit from the UK posthaste in search of greener pastures, which could strike a serious blow to the nation’s economic recovery efforts; even though these firms aren’t paying their fair share of taxes, they’re employing countless numbers of Brits in their UK headquarters, and if these firms pick up their tent stakes and relocate, the number of job losses could be catastrophic.

I suppose in the end we just have to cross our fingers and hope for the best, which is frustrating in the extreme for anyone trying desperately to meet ends in the current economy. Let’s hope the Government treads that fine line between ineffective and stifling for once, shall we?

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