GENERAL ANTI AVOIDANCE RULES: CURBING TAX AVOIDANCE OR NURTURING TAX TERRORISM?

Abstract

Leon Panetta stated that, “If we don’t do something to simplify the tax system, we’re going to end up with a national police force of internal revenue agents.” Internationally, there has been an increase in corporate re-structuring. India is also adopting pliable measures for Mergers & Acquisitions to enhance value, to achieve the elusive synergy and to consolidate business operations. The basic rationale behind this is the supposed belief that two separate companies together create a greater value than a company on an individual stand. The purpose of this route is majorly linked with the objective of wealth maximization and tax minimization. This minimization includes tax evasion and avoidance methodologies that are often utilized by enterprises with the purpose of expanding investor return. The avoidance of tax is being perceived as a region of concern and nations are exhibiting agitation over this. Various countries have enacted or are enacting new anti-avoidance rules in their taxation laws or are strengthening their current legislations on this.1 One such being the General Anti-Avoidance Rules or 'GAAR', enacted in their direct taxation codes, which allows the revenue authorities to declare vitiated arrangements as 'Impermissible Avoidance Arrangements.' It would be fair to make a statement that General Anti Avoidance Rules (GAAR) is a global effort.