Combatting Offshore Tax Evasion After Brexit EmilDuvessa SondajBandeen, Han Juliette Bowen, Mark O’Brien, Will Melling and Zeki Dolen Emil Sondaj Hansen,
that the HMRC’s application of the GAAR to their tax arrangements is invalid, rather than the other way around.
As a final point, and perhaps most egregiously, the provision that the GAAR cannot be applied to tax arrangements that have become ‘established practice’ must be removed.319 GAARs fundamentally exist because tax avoidance has become rife among MNEs. A GAAR that refuses to tackle the most popular forms of tax avoidance precisely because they are popular cannot be fit for purpose. It allows all manner of traditional avoidance schemes, most notably transfer mispricing and the use of offshore holding companies, to continue to exist.
Without serious modification, then, the UK GAAR will do nothing to curb the problem of tax avoidance because its effectiveness has repeatedly been undermined by provisions within the legally-binding guidance document that give the benefit of the doubt to taxpayers while tying HMRC’s hands. The UK must apply lessons learned from international experience, from the EU’s recommendations, the success of China and India, and the experiences of Australia and New Zealand, in order to make it an effective tool against tax avoidance. This, in turn, would allow the UK to undermine the leverage of tax havens and make it easier to tackle tax evasion.
V.III DOMESTIC REFORMS Due to Britain’s historically complicated relationship to tax evasion and its current relations to various offshore financial centres, the paper argues that the recommended multilateral recommendations must be accompanied with the following domestic reforms.
i.
Reform of the City of London
Often described as forming a ‘web’ of international finance connections, the City of London is connected to other British jurisdictions through shared legal and political ties. From Guernsey, Jersey and the Isle of Man, to recent former colonies such as Hong Kong and Singapore the
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HM Revenue and Customs (HMRC) (n 262) 17; 22–23.
The Wilberforce Society Cambridge, UK
www.thewilberforcesociety.co.uk
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