Public 'deceived' on tax avoidance

The Treasury has allowed voters to wrongly believe that a key anti-tax avoidance measure will force multinationals like Starbucks and Amazon to pay up, peers complained.

A House of Lords committee said the general anti-abuse rule (Gaar) is a welcome move but urged ministers to correct a misconception that corporate giants would be "slapped with massive bills".

It also called for a rethink of a crackdown on income tax reliefs which risk provoking "significant adverse effects on economic growth".

And it questioned the workability of a move to stop rich foreigners avoiding stamp duty on luxury UK properties and the "length and complexity" of the legislation to do it.

Chancellor George Osborne said he has made battling tax dodgers a priority amid a public outcry over the tiny sums being paid by some huge firms and rich celebrities.

He announced the introduction of the Gaar in his 2012 Budget, along with the caps on income tax reliefs for business losses and the annual residential property tax (ARPT) package.

All three have been examined by the cross-party sub-committee on the draft Finance Bill, which has published its findings a week before this year's Budget.

Peers concluded that it was right that the Gaar was narrowly drawn "given resource constraints and the need to provide certainty for business". But it should be subject to an independent review after five years to ensure it is acting as a deterrent, they said, expressing concerns about over-inflated public expectations.

Tory former cabinet minister Lord MacGregor, who chairs the committee, said: "There is a misconception that Gaar will mean the likes of Starbucks and Amazon will be slapped with massive tax bills. This is wrong and the Government need to explain that to the public.

"Gaar is narrowly defined and will only impact on the most abusive of tax avoidance. While this is the right approach for now, it is important that the policy is reviewed in five years to ensure it has met its objectives."