Tax avoidance
[5] Laws known as a General Anti-Avoidance Rule (GAAR) statutes, which prohibit "aggressive" tax avoidance, have been passed in several countries and regions including Canada, Australia, New Zealand, South Africa, Norway, Hong Kong and the United Kingdom.
[9][10][correct example needed] The US Supreme Court has stated, "The legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted".
The GAAR implies a set of generic anti-avoidance rules, while SAAR targets a specific avoidance practice or technique.
On the other hand, the substance over form principle is wider than the business rule and it is defined by the OECD as the ‘prevalence of economic or social reality over the literal wording of legal provisions’ (Ostwal, T.P.
Controlled Foreign Company Rule (CFC), to deter that the profit is transferred to a low or no tax country, 5.
As of 2012[update], only the United States and Eritrea have such a practice, whilst Finland, France, Hungary, Italy[citation needed] and Spain apply it in limited circumstances.
For example, the settlor of the trust may not be allowed to be a trustee or even a beneficiary and may thus lose control of the assets transferred and/or may be unable to benefit from them.
The Internal Revenue Service and the United States Department of Justice have recently teamed up to crack down on abusive tax shelters.
These partnerships could be structured so that an investor in a high tax bracket could obtain a net economic benefit from partnership-generated passive losses.
§ 183), the changes greatly reduced tax avoidance by taxpayers engaged in activities only to generate deductible losses.
[29] According to the figures, the UK lost £1 billion from profit shifting, around 0.04% of its GDP, coming behind Botswana (0.02%), Ecuador (0.02%) and Sweden (0.004%).
[30] In 2008 it was reported by Private Eye that Tesco utilized offshore holding companies in Luxembourg and partnership agreements to reduce corporation tax liability by up to £50 million a year.
[31] Another scheme previously identified by Private Eye involved depositing £1 billion in a Swiss partnership, and then loaning out that money to overseas Tesco stores, so that profit can be transferred indirectly through interest payments.
This scheme is reported to remain in operation and is estimated to be costing the UK exchequer up to £20 million a year in corporation tax.
[33] In 2016, it was reported in the Private Eye current affairs magazine that four out of the FTSE top 10 companies paid no corporation tax at all.
Google has remained the subject of criticism in the UK regarding their use of the 'Double Irish', Dutch Sandwich and Bermuda Black Hole tax avoidance schemes.
[40] PayPal, EBay, Microsoft, Twitter and Facebook have also been found to be using the Double Irish and Dutch Sandwich schemes.
[41] Other UK active corporations mentioned in relation to tax avoidance in 2015, particularly the Double Irish, Dutch Sandwich and Bermuda Black Hole: Other corporations mentioned in relation to tax avoidance in later years have been Vodafone, AstraZeneca, SABMiller, GlaxoSmithKline and British American Tobacco.
[59] The owners of Fetteresso Castle (now restored) deliberately destroyed their roof after World War II in protest at the new taxes.
[61] Also, in 1998 alone, a total of 94 corporations faced a net liability of less than half the full 35% corporate tax rate and the corporations Lyondell Chemical, Texaco, Chevron, CSX, Tosco, PepsiCo, Owens & Minor, Pfizer, JP Morgan, Saks, Goodyear, Ryder, Enron, Colgate-Palmolive, Worldcom, Eaton, Weyerhaeuser, General Motors, El Paso Energy, Westpoint Stevens, MedPartners, Phillips Petroleum, McKesson and Northrop Grumman all had net negative tax liabilities.
[66] In 2012, Hewlett-Packard lost a lawsuit with the IRS over a "foreign tax credit generator" which was engineered by a division of AIG.
... 'We're talking about very big, well-known brands – HSBC, Citigroup, Bank of America, UBS, Credit Suisse ... and they do it knowing fully well that their clients, more often than not, are evading and avoiding taxes.'
An organisation, UK Uncut, began to encourage people to protest at local high-street shops that were thought to be avoiding tax, such as Vodafone, Topshop and the Arcadia Group.
[83] Prem Sikka, Professor of Accounting at the Essex Business School (University of Essex) and scientific advisor of the Tax Justice Network pointed to a discrepancy between the Corporate Social Responsibility claims of multinational companies and “their internal dynamics aimed at maximising their profits through things like tax avoidance”.
After two decades, there have been numerous decisions, with inconsistent approaches, and both the Revenue authorities and professional advisors remain quite unable to predict outcomes.
In the UK in 2004, the Labour government announced that it would use retrospective legislation to counteract some tax avoidance schemes, and it has subsequently done so on a few occasions, notably BN66.
Initiatives announced in 2010 suggest an increasing willingness on the part of HMRC to use retrospective action to counter avoidance schemes, even when no warning has been given.
[89] The UK Government has pushed the initiative led by the Organisation for Economic Co-operation and Development (OECD) on base erosion and profit shifting.
[90] In the 2015 Autumn Statement, Chancellor George Osborne announced that £800m would be spent on tackling tax avoidance in order to recover £5 billion a year by 2019–20.
[94] Former Liberal Democrat Business Secretary Vince Cable also said Google had "got off very, very lightly", and Osborne "made a fool of himself" by hailing the deal as a victory.
