Graham Aaronson QC, who advised David Cameron that a general anti-avoidance rule would combat ‘aggressive’ tax avoidance, warns there will be ‘riots in the streets’ if wealthy tax dodgers are not addressed by the government.
Specialist tax barrister, Graham Aaronson QC, hopes that the introduction of a general anti-avoidance rule (GAAR) will ban ‘aggressive’ tax avoidance arrangements such as the K2 tax avoidance scheme, used by Jimmy Carr, that Aaronson said made his ‘blood boil’.
Graham Aaronson QC, architect of the GAAROn 26 June The Mail Online reported that the ‘architect’ of the GAAR believed that the wealthy have a ‘responsibility to contribute to the running of the country’ which is ‘essential to maintaining public order’, and that if the government do not deal with tax avoidance by the wealthy that there will be ‘riots in the streets’.
“People on the street don’t want these schemes to go ahead. I feel very strongly that abusive tax schemes are anti-social and this sort of thing fuels the anger of the average person. The tents have been pitched at St. Pauls and more riots in the streets are not far away if we don’t deal with this,” Aaronson said in an interview with The Times.
It is thought that tax avoidance by the individual taxpayer costs the Revenue an estimated £4.5 billion a year and that tax avoidance by corporations’ costs £30.5 billion – a grand total of £35bn per year; the UK tax gap.
After being asked by the Prime Minister as to whether the introduction of a GAAR would reduce the tax deficit, Graham Aaronson QC recommended the introduction of a general anti-avoidance rule to Cameron in November. It was then announced in Chancellor George Osborne’s budget speech in March 2012 that a GAAR will be legislated for in the 2013 Finance Act.
Aaronson insists that the introduction of a GAAR will help the Treasury to tackle the problem of tax avoidance without destroying the competitiveness of the UK as a place to do business. Although, Aaronson QC has not recommended that the government adopt an all or nothing approach as a ‘broad spectrum’ law for all tax avoidance schemes would ‘undermine’ business. So, it remains to be seen in the new legislation how the GAAR will determine what does and what doesn’t constitute an ‘aggressive’ tax avoidance arrangement.
The Mail Online reports that ‘Senior HMRC officials are said to fear that Mr Aaronson’s plan does not go far enough’. Since the unveiling of the K2 tax avoidance scheme used by Jimmy Carr, David Cameron’s branding of Carr’s tax affairs as ‘morally wrong’ and much publicised news of celebrities including Take That members, foul-mouthed comedian Frankie Boyle and Olympic cyclist Chris Hoy, calls for action on a stern crackdown on tax avoidance have risen by popular demand.
Brewer and pub chain, Greene King, has also hit the headlines for losing up to £9million in a tax tribunal that ruled against a tax avoidanceGreene King Tax Avoidance Ruling scheme used by the company. The Mail Online reported on the 30 June that the Ernst & Young tax avoidance loophole had been closed by Treasury legislation, a ruling which means ‘Greene King might end up having to pay tax twice on the same profits – doubling its tax bill to up to £18 million’.
Recently it has also been reported that over 1,300 private and NHS doctors and dentists are under tax investigation for tax evasion and that the England Cricket team are HMRC’s next target for the use of legal tax avoidance loopholes to reduce their tax liabilities. Chief Secretary to the Treasury, Danny Alexander has also announced that if the UK tax gap of £35billion was cut by a quarter that the average taxpayer would save 2p per £1 of their tax bill.
Mark Serwotka, general secretary of the Public Services and Commercial Union (PCS), said: “It is sickening to see millionaires in the cabinet wringing their hands about the immorality of tax avoidance when it is their lack of political will to act that means we lose tens of billions pounds every year.
“The case for investment in our public services as an alternative to austerity could not be more obvious than it is in HMRC. Yet the government wants to cut 10,000 more jobs from the department, letting the wealthy tax dodgers off the hook and punishing the rest of us for a recession we did not cause.”
Following a recent strike from over 50,000 HM Revenue and Customs employees, The Mail Online also reported that ‘a backlog of 20,000 [tax avoidance] cases could take up to 38 years to complete’ because of a ‘shortage of tax inspectors due to cuts’ at the Revenue.
This is Money.co.uk also announced this week that there is ‘pressure on the National Audit Office’ to ‘investigate tax avoidance and HMRC loopholes’, reporting that: “Whitehall’s watchdog is being pressed to launch an investigation into tax avoidance by the wealthy”. This follows a suggestion from the chairwoman of the Public Accounts Committee, Margaret Hodge, that the NAO had confirmed that they would investigate how HMRC deal with tax avoidance loopholes; This is Money.co.uk said that the NAO is yet to decide whether or not to carry out the study.