I fear that you, Madam Deputy Speaker, might accuse me of straying into rather unexplored territory if I were to compare tax avoidance to pornography, so I simply acknowledge the point my hon. Friend makes, which is that they are very subjective terms. That point has been made not only by me, but by many experts who are very concerned about the wording in the legislation. That is why it would be useful if the Minister responded to some of the concerns that have been raised during the Bill’s consideration.
The GAAR is projected by the Government to result in an additional yield of only £85 million a year by 2017-18. That is a notable sum of money, but it does not even come close to putting a serious dent in the £5 billion tax gap estimated to arise each year as a result of avoidance activity, and it is a mere drop in the ocean compared with the overall annual tax gap of £32 billion estimated by HMRC, which we know is a conservative projection. We also know that concerns remain about
the so-called “double reasonableness” test and the GAAR advisory panel that will judge whether arrangements can
“reasonably be regarded as a reasonable course of action.”
As I have highlighted previously, what one person—let us say, a tax expert who has spent his or her entire career advising companies on how they might reduce their tax liability—regards as reasonable could be very different from what a member of the public or, indeed, a Member of this House might consider to be reasonable.
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Will the Minister update the House on the likely membership of the GAAR panel? I know from a recent written answer that there have been 60 applications for it. Up to eight members are expected to be announced at some point this month by HMRC and the panel’s chair, Patrick Mears, who is currently a tax partner at Allen and Overy. Is the Minister aware of the backgrounds of the people from whom the applications have been received? It would be useful for the House to have that information at this stage. It is clearly vital that a proper balance is struck on the make-up of the panel given that it has such a fundamental role in how the GAAR will work and how effective it will be. If it is going to work, it must be credible and have public confidence.
Another concern expressed about the GAAR is that it is too narrow and cannot really be described as “general” at all. Indeed, the Government’s new clauses seem to demonstrate that. The GAAR applies to corporation tax, yet the Government are still having to introduce targeted anti-abuse rules to deal with loss buying undertaken to avoid or reduce corporation tax liability. It would be helpful if the Minister outlined how the GAAR is intended to operate. What corporation tax activity would be sufficiently egregious or abusive for it to be covered by the GAAR without the Government having to introduce separate targeted anti-abuse rules to deal with it? Does this mean that they need to introduce a targeted rule to deal with every specific loophole that is not covered by the GAAR because otherwise they run the risk of tacitly legitimising any activity that is not covered?