Something similar can be found in the Australian context in the Ralph Report

Something similar can be found in the australian

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Something similar can be found in the Australian context in the Ralph Report (1999). Australia’s big power is the General Anti-Avoidance Rule (GAAR), but the Ralph Report has sought a clear statement that ‘the GAAR will not apply to the mere use in a straightforward and ordinary manner of structural features of the law to best advantage’. A ‘statement of policy should confirm the circumstances in which the GAAR could be applied and reduce the perception that valid business practices could unintentionally be subject to the application of the GAAR’ (p. 241). It has recommended that there should be a board to review the application of the GAAR, including rulings on whether or not a practice is caught by the rule. It has argued the need for producing clarity without mapping the minefield (Ralph Report, 1999, p. 44). This unfortunately is not a solution but a restatement of the problem – just how to produce the clarity requested without mapping the minefield. There is a real danger that in pursuit of ‘clarity’, the big power of the GAAR may be limited to narrower parameters and reduced to rules, undermining its capacity to override rule-based avoidance. This narrowing can also be produced through the courts, not just through the enforcement agency losing but through the process of decisions being made (whoever wins or loses), reasoning being set out, and new material being provided for those bent on exploiting creative compliance. In the context of the new approach to tax avoidance in the UK, new ‘rules’, and therefore material for creative compliance, were found by scrutinising the arguments used by the judges, even in the Ramsay case, which introduced the anti-avoidance principle of looking through form to substance. The Ramsay case comprised a circle of ‘self-cancelling’ transactions used to create an artificial loss, not unlike the recent Australian ‘investment schemes’ (Senate Economics References Committee, 2001), though more complex. The transactions required two companies and a subsidiary controlled by the taxpayer, two companies controlled by the scheme promoters (the Rossminster group). It involved two loans, one share issue, the exercise of options on interest levels (the interest rate on one loan was changed from 11 per cent to 22 per cent, on the other from 11 per cent to zero), the sale of the 22 per cent loan to a company controlled
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236 Taxing Democracy by the scheme promoter, which then sold the loan to the subsidiary of taxpayer company B, two liquidations, loan repayments, and exchange of shares for loanstock in another promoter-controlled company. Yet it was, as the judges observed, ‘all over by lunch’. What is more, these multiple deals had ‘no business purpose’. These observations were seized upon and steps taken in subsequent tax avoidance schemes to factor in a business purpose (with ‘careful minuting’, as one interviewee put it, to record it) to build in gaps and contingencies, and to change the timescale.
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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