Tuesday, January 15, 2013

Feasibility of GAAR for removing the practice of Tax Avoidance

Feasibility of GAAR for removing the practice of Tax Avoidance
Internationally, tax avoidance has been recognized as an area of concern and several countries have expressed concern over tax evasion and avoidance. This is also evident from the fact that either nations are legislating the doctrine of General Anti-Avoidance Regulations in their tax code or strengthening their existing code. General Anti-avoidance Rule (herein referred as GAAR) is a concept which generally empowers the Revenue Authorities in a country to deny the tax benefits of transactions or arrangements which do not have any commercial substance or consideration other than achieving the tax benefit. Denial of tax benefits by the Revenue Authorities in different countries, often by disregarding the form of the transaction, has been a matter of conflict between the Revenue Authorities and the taxpayers. Different countries have taken different approaches in this regard. Australia was in the forefront of introducing a GAAR as early as 1981.
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