- Majority of senior tax executives in favour of a General Anti-Abuse Rule (‘GAAR’) targeted against highly abusive or artificial tax planning, finds KPMG survey
- The time has come for much greater transparency in order for there to be an informed debate on tax, says KPMG
60 percent of senior tax executives are in favour of a General Anti-Abuse Rule (“GAAR”) which is targeted against highly abusive or artificial tax planning, finds a KPMG survey.
According to KPMG’s 2012 Survey of Tax Competitiveness, such a rule is likely to be effective in terms of reducing abusive tax practices. Among senior tax executives polled in large companies in the UK, 70 percent of respondents agreed that the proposed GAAR would be effective at reducing highly aggressive tax planning in the UK.
But there is concern that, as currently drafted*, the GAAR is likely to also catch legitimate tax planning and commercial transactions. The vast majority of the sample (96 percent) wanted a clearance system (under which a proposed tax arrangement could be agreed in advance with the tax authorities) and 42 percent would be willing to pay a fee for this to cover the administrative and time costs involved.
Jane McCormick, head of tax at KPMG in the UK, commented: “This desire for clearances and willingness to pay for them demonstrates corporates’ desire for certainty over tax issues.
“The general support for the GAAR also shows business is listening to the public debate about tax and is willing to engage. But in order to inform that debate, corporates must start thinking about how they could be more transparent in their reporting to provide more information on their tax affairs.”
Jane McCormick continued: “Our survey clearly shows that business supports a properly drafted general anti-abuse rule (‘GAAR’) to combat artificial and abusive tax planning and we expect to see further details of the rule in the Chancellor’s Autumn Statement next week.”
Jane McCormick stressed the importance of transparency for an informed debate on tax:
“There are major concerns that the GAAR may also sweep up legitimate tax mitigation arrangements and general commercial transactions. Indeed in the current debate we have seen the tendency to assume a low tax rate must imply unacceptable tax planning which is not necessarily the case. However, without transparency, it is very difficult to understand what is going on in tax.
“We believe that corporates are going to have to embrace transparency to explain what taxes they are paying and where they are paying them. By doing so they will also illustrate how their presence contributes to the economies in which they operate whether that be by generating employment (income taxes), sales (indirect taxes), paying business rates or through corporation tax. Pulling that data together is not always straightforward but forward thinking corporations, especially in the extractive industries where this has been a focus of recent activity, are already doing so. We predict that a tax report will, in time, become as much a feature of the annual report as a Corporate Social Responsibility statement is today.
“With improved transparency on tax, hopefully the ‘bigger picture’ of how a business-friendly tax system can attract corporates will emerge demonstrating how the UK’s ambition to create the most competitive tax regime in the G20 can play a key role in rebuilding the economy and fuelling the recovery. The risk is that without this transparency, the current debate may turn into a ‘witch-hunt’ deterring businesses from investing in the UK.”
* Proposals for a GAAR date back to December 2010 when Graham Aaronson QC was asked by the Government to report on whether a general anti-avoidance rule would be beneficial for the UK tax system. Graham Aaronson's report was published on 21 November 2011. He concluded that introducing a broad spectrum general anti-avoidance rule would not be beneficial to the UK tax system, and instead recommended the introduction of a rule which is targeted at abusive arrangements. The Government announced at Budget 2012 that it accepted this recommendation and would consult with a view to bringing forward legislation in Finance Bill 2013 that was both effective in tackling artificial and abusive avoidance schemes and also practical both for taxpayers and HMRC. A consultation document on such a GAAR was published in June 2012. Details are available on the HMRC web page.
For further information please contact:
Margot Cowhig, KPMG Corporate Communications
Tel: 0207 694 4246 Mobile: 07920 274856: firstname.lastname@example.org
KPMG Press Office: 0207 694 8773
Notes to editors.
For its 2012 annual Tax Competitiveness Survey, KPMG commissioned specialist strategy consultants, Gulland Padfield, to interview 57 senior tax decision makers from a number of the largest publically listed companies and foreign subsidiaries in the UK during October 2012. 72% of the companies interviewed had a turnover of £1bn. 15 of the companies interviewed were members of the FTSE 100, 22 in the FTSE 250 and 20 Foreign Subsidiaries. A summary of the survey’s findings will be published in due course.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.