Even without resort to courts precedents build up In the context of rulings on

Even without resort to courts precedents build up in

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Even without resort to courts, precedents build up. In the context of rulings on the application of the General Anti-Avoidance Rule, it has been observed that ‘an important body of case law is building up’ (Clayton Utz, 1999). Rulings or clearances may be sought informally whether there is a statutory right to them or not, and interviews with UK tax officials and accountants indicated frequent requests to the Technical Office of the Inland Revenue for informal advice on ‘hypothetical’ or ‘no-names’ transactions. Tax officials had an ambivalent attitude to such requests, preferring to avoid rulings on such a basis but finding the requests a valuable source of information on the latest creative thinking. Potential new material for creative compliance is also produced every time there is a decision on the part of the agency on how a principle should apply to a specific situation. Even a simple failure to challenge a practice can be treated as endorsement by default, and built upon. Application Big powers are only as big as their application, and application may in practice be curtailed by a range of factors. These can be illustrated by looking at the record of enforcement in the new UK accounting regime. 10 The body responsible for enforcement is the Financial Reporting Review Panel, which came into being in 1991, armed with the extensive new powers listed above; and with a big stick sanction in the background in the judicial power to make directors personally liable for all the costs of revising and reissuing accounts which were successfully challenged by the Panel, along with legal costs. The Panel announced that it would use the true and fair super-principle to stop creative compliance: Where we are firmly of the view that accounts are not true and fair, we will not be deterred from taking action by the fact that there is room for forensic argument as to technical compliance with the particular FRS [accounting standard] (Financial Reporting Council, 1992, p. 24). In other words, the Panel would use the true and fair principle to override what it saw as creative compliance. But to date this power has never been used for this purpose. Rather, the Panel has monitored those situations where companies have invoked the true and fair principle to override compliance with specific rules. Indeed, it has tended to require companies to adhere to the rules even where there is strong opinion that following the rules does not produce true and fair accounts. In doing so the Panel
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When Compliance is not the Solution but the Problem 237 may indeed be damaging its big powers. It may be setting a precedent that following the rules is more important than following the principle of a potentially clashing true and fair view. The big power of FRS5, requiring companies to report substance not just legal form, has been used only once against a small company.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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