UK Rejects GAAR.

The Chancellor of the Exchequer for the United Kingdom, Gordon Brown, has released that country's budget package, which will not include a general anti-avoidance rule (GAAR) -- at least for now. In unveiling the proposals, the Chancellor stated that enactment of a GAAR remains an option for the future if more targeted legislation proves ineffective in dealing with the problem of avoidance. The Government will not, however, seek the legislation this year. At least one commentator has suggested that the lack of an effective pre-clearance procedure to screen transactions may be the basis for the decision not to proceed with the proposal.

UK's Inland Revenue last year released its Consultative Document on General Anti-Avoidance Rule for Direct Taxes, requesting comments on whether the United Kingdom should adopt a GAAR and, if so, what form the rule should take. TEI filed comments on the issue in January, expressing concern about the potential reach of the proposal. "The experience of our members in Canada and the United States with GAAR-type rules teaches that it is very difficult to define a general rule that does not also reach routine business transactions," the Institute stated. For at least the short term, opposition by TEI and others has been effective.

The Institute's comments on the Consultative Document were reprinted in the January-February 1999 issue of The Tax Executive.