Strategizing Multinational Tax Risks

HMRC has released a Consultation document entitled: Strengthening Sanctions for Tax Avoidance.  The document was provided on 30 January 2015, with comments due by 12 March 2015.  The document targets repeat offenders of tax avoidance schemes, and also proposes GAAR penalties and processes.

A link is included for reference:

Click to access Strengthening_sanctions_for_tax_avoidance_-_consultation_document.pdf

Key provisions:

• It is focused on “tax avoidance” arrangements, specifically targeting “serial avoiders.”
• A tax surcharge and special measures are suggested for repeated use of tax avoidance schemes.
• A “name and shame” approach is also suggested, although being wary of reputational damage.
• GAAR: It is now the right time to reconsider imposition of a GAAR-specific penalty and surcharge.  The document addresses maintenance of the current GAAR Independent Advisory Panel and related guidance, for which a flowchart is provided in Annex B for reference.
• A series of questions re: Serial Avoiders and GAAR Penalties are provided for comment.

It is interesting to note the surcharge and accelerated payment concepts, also introduced in the controversial Diverted Profits Tax proposal.  Additionally, retaining the GAAR independent panel is a welcome statement that is not proposed for comment.

The inherent subjectivity of “tax avoidance” proposals potentially subject taxpayers and tax administrations to further complexity, additional costs and potential double taxation.  Therefore, all interested individuals and organisations should review this document and prepare comments to address this initiative, as other countries will be following these developments for possible application in their respective jurisdictions.