Tax

This article first appeared in a slightly different form in International Tax Review, March 2011

During the previous government's time in office, the volume of tax legislation increased dramatically and a high proportion of that new legislation took the form of anti-avoidance provisions. The new Coalition government set out its stall on tax avoidance in its earliest pronouncements. Within two weeks of entering office, the Coalition revealed its programme for government over its five year term in which it broadly stated, "we will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals". A month later, in the Emergency Budget, the Coalition government published two documents: first, Press Notice 3 on "Tackling Tax Avoidance" which broadly restated the aims of the Coalition agreement; and "Tax Policy Making: a new approach" which, to an extent, fleshed out these general proposals. In this latter document, the Coalition government asserted that the approaches to tackling tax avoidance of the previous administration, including frequent legislative changes and detailed targeted anti-avoidance rules, had led to "instability and complexity", and an ensuing lack of public confidence, in the tax system. The Coalition government proposed a more strategic, measured approach against tax avoidance:

• through legislative approaches that clearly set out the intended objectives;
• through reviewing and strengthen areas of the existing legislation where repeated changes have been made to close loopholes;
• by considering the introduction of a general anti-avoidance rule (GAAR); and
• by considering whether certain legislative changes should take immediate effect outside of the Budget.