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The Chamber of Tax Advisers of Russia International Tax Congress St Petersburg 19 September 2013

The Chamber of Tax Advisers of Russia International Tax Congress St Petersburg 19 September 2013 David Russell AM QC. General Anti-Avoidance Provisions: Do they really work, and do they discourage foreign investment?. Role of Presentation. General outline of topic

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The Chamber of Tax Advisers of Russia International Tax Congress St Petersburg 19 September 2013

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  1. The Chamber of Tax Advisers of Russia International Tax Congress St Petersburg 19 September 2013 David Russell AM QC

  2. General Anti-Avoidance Provisions: Do they really work, and do they discourage foreign investment?

  3. Role of Presentation • General outline of topic • Full paper available on Chamber website or russell@wentworthchambers.com.au

  4. The Chancellor’s Foot • The need for stable and predictable outcomes to litigation and disputes • A function of the Rule of Law • The “smell test” and the Revenue’s nose

  5. Tax avoidance responses • Ramsay doctrine • Abus de droit • Business purpose test (US) • General Anti Avoidance Rules

  6. GAARs – an Australian innovation • Predates Federation • Part of Federal Income Tax from the outset • Suggests GAARs are not the end of the world – but for a long time not effective • Modern history started in 1981

  7. Key concepts • Sham • Evasion • Mitigation • Avoidance

  8. Key concepts (revised) • “Acceptable” tax planning • “Gross”, “egregious” or “unacceptable” tax avoidance • Not entirely clear how differs from third and fourth concepts on previous slide

  9. GAAR considerations • Removal of implication against tax avoidance on other provisions. • How to strike a reasonable balance? • Former section 260 as example

  10. Key issues • Change of legal form of receipt • Choices in legislation • Disposal in income source • Antecedent liability

  11. Interpretation in the Courts • Minds can reasonably differ • Explanatory materials (“travaux preparatoires”) of little assistance in common law context

  12. Problems? • “Do nothing” alternative • Commercial arrangements

  13. The UK approach • Aronson Review • Broad spectrum v. narrow spectrum

  14. GAAR advantages - Aronson • Deterrence of “unacceptable” schemes • A level playing field for business and professionals • Enhanced certainty in construction of provisions • Improved simplicity in legislative drafting • Administrative simplicity without discretion • Building trust

  15. Risks • Cherry picking of Report • Mission creep • Inversion of role of taxpayers and revenue • Difference of perspective

  16. Economic effect • Potential to create issues of sovereign risk • Need to have both consistency if approach and a realistic approach to commercial issues • A very high price can be exacted if competitive advantage foregone

  17. THE END

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