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UK law will not tackle firms' 'aggressive' tax avoidance

Legislation on tax avoidance going through Britain's parliament will not address the kinds of corporate tax minimisation that often uses companies in other European countries to avoid tax, a parliamentary committee said yesterday.

The General Anti-Abuse Rule (GAAR), which is part of a wider finance bill, would grant the British tax authorities additional powers to counter "abusive" tax avoidance.

But a sub-committee in the House of Lords examining the bill said GAAR would not tackle the practices used by companies such as Amazon and Starbucks to reduce their tax bill.

A report on coffee chain Starbucks last year revealed the company had paid minimal tax over a 14-year period, prompting criticism from politicians, protests at stores and boycotts by customers at the activity.

Online retailer Amazon has been criticised for channelling its European profits via an untaxed Luxembourg entity.

Tax campaigners have criticised what they see as a watering down of the draft GAAR legislation, which was initially planned to tackle "aggressive" tax avoidance, something that later became "abusive" tax avoidance.

The actions of Starbucks and Amazon – which say they file all the appropriate taxes in every country in which they operate – would likely not be deemed abusive under the proposed legislation because they take advantage of arrangements allowed by international tax rules to shift profits.

The Government says while it wants businesses to pay their fair share of taxes, it is also keen that Britain should have the most business-friendly tax system in the G20. The sub-committee agreed that the narrow focus of the GAAR was the best approach to avoid uncertainty for business.

The sub-committee said in a statement that the GAAR should be independently reviewed after five years to "ensure that it is working properly and having the appropriate deterrent effect".

It also called for an acceleration of an international review, being led by the Organisation of Economic Co-operation and Development, of how multinational companies are taxed.

The sub-committee added that separate plans, also due to be included in the finance act, to introduce a tax on residential properties worth over £2m (€2.3m) owned by corporations – a device often used by individuals to avoid stamp duty and capital gains taxes – was excessively complex and potentially unworkable. (Reuters)

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