George Osborne has unveiled plans for a general anti-avoidance rule (GAAR) as he seeks to clampdown on ‘unacceptable’ tax avoidance.
Details of the GAAR will be unveiled later this month, and the chancellor also confirmed today an extra £77 million will be handed to HMRC in a bid to improve enforcement of tax law on multinationals.
With this move the governement expects to bring in an extra £22 billion in revenue from tax avoidance before the next election.
'HMRC's budget will not have its budget cut as other departments. Instead we will spend £77 million more on fighting tax avoidance - and not just for the wealthy,' he said.
The money will go towards setting up a new 'centre of excellence' which the government says will mean a 'marked difference' to HMRC's ability to end offshore tax evasion.
A more comprehensive strategy document laying out HMRC's plans to clamp down on tax avoidance will be released in spring next year, but Osborne did say that 2,500 extra tax inspectors will be brought on board and four tax loopholes would be closed.
The news follows public outcry over the low levels of tax paid by multinationals including Starbucks, Amazon and Google after the corporates gave evidence to the Commons public accounts committee in November.
Committee chair Margaret Hodge said that HMRC should be ‘more aggressive and assertive’ in addressing corporate tax avoidance.
Many multi-jurisdiction businesses use ‘transfer pricing arrangements’, where offices registered overseas are used to take profits out of the UK and thus reduce the overall corporation tax bill.
UK based companies – which pay corporation tax on their taxable profits wherever they are made - have spoken out against the practice, arguing the government should do more to level the playing field in corporation tax.
With the commitment of cash, Osborne hopes to speed up work on transfer pricing arrangements, with an eventual aim of raising the levels of tax paid in the UK by corporates.
However, head tax at law firm Berwin Leighton Paisner said that many of the tax avoidance loopholes were actually the result of previously introduced tax incentives.
'Paradoxically the "loopholes" that so infuriate the Chancellor have been created by excessive tinkering and changes to the tax regime by successive governments. Some of these so-called "loopholes" were called incentives when they were introduced."