Abstract:
Tax avoidance is obviously a serious problem. It costs most governments very substantial sums in revenues lost and it undermines the legitimacy of the tax system, because people are inclined to think that, if others are avoiding tax, perhaps they should too. The obvious solution to the problem of tax avoidance is to pass a law against it. But at once a difficulty arises, because so far no one, anywhere in the world, has come up with a satisfactory definition of “tax avoidance” — and it is generally not a good idea to enact a law against something that you cannot define. Nonetheless, the problem of tax avoidance is so serious that having a rule against it is better than not having one. Many governments have taken this position and enacted laws against tax avoidance, even though they cannot define it. This article advances the argument that General Anti-Avoidance Rules or GAARs (that is, rules against tax avoidance as such) should be as simple as possible; that most countries’ GAARs are counterproductively complex; and that it would therefore be advantageous to simplify them. It comprises, with minor modifications, the text of the author’s address to the United Kingdom Labour Party’s workshop on tax avoidance, Portcullis House, London, 16 May 2019.