Finally, once the Tax Avoidance Group becomes part of an audit, the process is slowed even more than usual resulting in ever-higher interest costs. As our members' experience in Canada demonstrates, enactment of a general rule runs the real risk of imperiling ordinary business transactions. We therefore urge Inland Revenue to narrow the scope of any Rule to target only the transactions that are causing the concern. Under paragraph 6.6.2, the trigger for a GAAR would be a transaction with tax avoidance as a sole or main purpose. This Rule applies to any transaction of which the sole or main purpose, or one of the main purposes, is tax avoidance by a company.
Taxes are always a significant consideration for any corporation evaluating a transaction.
Quite properly, companies ignore the tax law at their peril. Consequently, bona fide transactions structured to provide substantial economic benefit to a corporation should not be subject to a GAAR merely because tax savings flow from the transactions. In other words, where multiple alternatives are available to accomplish a business objective, a taxpayer may choose any alternative that is legally and ethically available. If one alternative produces a lower tax liability, the structure of that alternative should not be attacked under a GAAR so long as the primary purpose is not tax avoidance. TEI therefore recommends that if a GAAR is ultimately adopted, it be limited to transactions where tax avoidance is the sole or main purpose.