The Centre for Business Taxation has published three reports on tax avoidance, these reports were commissioned by the National Audit Office (NAO) and they form part of the evidence base behind the NAO’s report: “Tax avoidance: tackling marketed avoidance schemes” (November 2012). On Thursday, December 6, the Public Accounts Committee will meet senior officers of the HMRC and others to discuss tax avoidance, and in particular marketed tax avoidance schemes.

Nothing stated here should be taken to represent the views of the NAO.

The reports and an executive summary are available here.

The main conclusions of the reports are:

1. Tax Avoidance

Varying use of the term “tax avoidance” has caused much confusion in the current debate. The CBT report distinguishes three categories (all of which are legal).

A. Ineffective avoidance. These schemes can be combated under existing laws provided the activity is discovered and action is taken. Appropriate actions include adequate disclosure provisions and properly resourcing the HMRC.

B. Effective avoidance. This is activity which reduces tax payable due to a defect in the legislation or failure in the way it is written that cannot be corrected by the courts. Its effectiveness may depend on the approach taken by the courts to interpreting the particular statute in question. In these cases, the appropriate actions will be revision of the law through better drafting or, more immediately,  in by introducing  specific anti‐avoidance rules and also a General Anti‐Avoidance/Abuse  Provision.

C. Using legislation or the international tax system to one’s advantage. These are transactions that reduce taxation either by using legislation that offers certain opportunities or by relying on the structure of the international taxation system. Although these cases have been described as avoidance, they do not involve the type of exploitation of defects that come under category B. The only way to deal with this problem  is through radical reform of the international tax system.


The DOTAS (“Disclosure Of Tax Avoidance Schemes”) regime, introduced in 2004, requires promoters or users of tax avoidance schemes to disclose them to HMRC. HMRC claim that the regime has been “highly successful”. The CBT report considers the role that a disclosure regime plays and acknowledges its potential value and some limited  evidence of success, but also note the flaws in the regime- some  further  tightening up is needed. The paper raises a series of questions  on further evidence need to evaluate HMRC’s claim..

 3. The Tax Gap

HMRC defines the “tax gap” as “the difference between tax collected and the tax that should be collected”. Broadly, this relates to transactions in Category B: effective avoidance, which courts find to be compliant with the law, but which are contrary to the intention of Parliament in the view of HMRC. It is deeply misleading to suggest that this represents non‐compliance or a failure to pay tax which is due.

 The Centre for Business Taxation is a research centre of the Saïd Business school. It is an independent academic organisation that has no collective view. The academic review represents the view of the individual authors only: Professor Michael P. Devereux, Professor Judith Freedman and Dr. John Vella.

Details of the independent status of the OUCBT and its various sources of sponsorship can be found  here.