CBI carries out a U-turn on rules to curb tax dodging

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The Independent Online

The Confederation of British Industry (CBI) has backed new powers for the Government to stamp out aggressive corporate tax avoidance schemes, which the employers' organisation admits are seriously damaging the reputation of British industry.

The dramatic U-turn comes after a Treasury-commissioned report published by Graham Aaronson QC last November recommended a "General Anti-avoidance Rule" (GAAR) to replace the existing plethora of UK tax regulations.

The CBI warned that a sweeping new anti-avoidance rule risked creating harmful uncertainty for firms. But now the business body has thrown its weight behind the GAAR. "We don't think business is done any favours by these highly abusive [tax avoidance] schemes which essentially tar all of us," said William Morris, chairman of the CBI's tax committee.

The CBI is today launching a campaign which aims to correct the public perception that UK businesses are not paying their fair share of tax. John Cridland, the CBI's director general, said it was time for his organisation to push harder those businesses that aggressively avoid tax.

"Traditionally there's been the two categories: legitimate tax management, which HMRC accept is legal, and tax evasion that we don't support," he said. "If we're going to be honest in this public debate, there is a middle ground, there's a third category."

Mr Cridland defined this third category as "black box" arrangements, when businesses enter into opaque tax schemes that have no real relationship to the firm's underlying commercial purpose.

"The CBI is saying those sort of arrangements may technically be legal, but if they're a black box-type arrangement, strictly non-commercial, we don't support it," he said. "And we're quite up for [the taxman] getting those sorts of arrangements out."

However Richard Murphy, of the campaign group Tax Justice Network, said that: "The GAAR would only tackle the very periphery of abuse."