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Mr. Christophe J Waerzeggers and Mr. Cory Hillier
Tax avoidance continues to attract attention globally with strong support for tax law reform at all levels. This Tax Law IMF Technical Note focuses on some of the key design and drafting considerations of one specific legal instrument (being, a statutory general anti-avoidance rule (GAAR)) which is often considered by authorities to combat unacceptable tax avoidance practices. A GAAR is typically designed to strike down those otherwise lawful practices that are found to be carried out in a manner which undermines the intention of the tax law such as where a taxpayer has misused or abused that law. However, the objective of combating unacceptable tax avoidance can itself make the legal design of a GAAR complex. This is simply because the phrase “tax avoidance” means different things to different people. Whatever the form of a GAAR, it should give effect to a policy that seeks to strike down blatant, artificial or contrived arrangements which are tax driven. However, the GAAR should be designed and applied so as not to inhibit or impede ordinary commercial transactions. This Tax Law IMF Technical Note discusses and explores how drawing a line between those arrangements which should be caught by the GAAR is a matter of degree and can be delicate.
Mr. Christophe J Waerzeggers and Mr. Cory Hillier

Tax avoidance continues to attract attention globally with strong support for tax law reform at all levels. This Tax Law IMF Technical Note focuses on some of the key design and drafting considerations of one specific legal instrument (being, a statutory general anti-avoidance rule (GAAR)) which is often considered by authorities to combat unacceptable tax avoidance practices. A GAAR is typically designed to strike down those otherwise lawful practices that are found to be carried out in a manner which undermines the intention of the tax law such as where a taxpayer has misused or abused that law. However, the objective of combating unacceptable tax avoidance can itself make the legal design of a GAAR complex. This is simply because the phrase “tax avoidance” means different things to different people. Whatever the form of a GAAR, it should give effect to a policy that seeks to strike down blatant, artificial or contrived arrangements which are tax driven. However, the GAAR should be designed and applied so as not to inhibit or impede ordinary commercial transactions. This Tax Law IMF Technical Note discusses and explores how drawing a line between those arrangements which should be caught by the GAAR is a matter of degree and can be delicate.

Ms. Lucilla Mc Laughlin and John Buchanan

taxable. If the tax code does not identify a source of income as taxable, then it usually is not. This approach can cause problems for tax administrators when an income item cannot be attached to a direct source or comes from an unlegislated source. 22 See Appendix VIII Initiatives on International EOI at Current Challenges in Revenue Administration: Improving Tax Compliance , IMF, April 2015. 23 Introducing a General Anti-Avoidance Rule: Ensuring That a GAAR Achieves Its Purpose , IMF Technical Note, January 2016. 24 Direct methods rely on

International Monetary Fund. Western Hemisphere Dept.

was received. 16. The reform also includes tax administration measures and green and excise taxes . Tax administration gains are the third largest component of the reform, yielding 0.5 percent of GDP from lower evasion and avoidance. Specific measures include improving access to information for the SII, introducing a general anti-avoidance rule and strengthening auditing capacity. The reform will also allow for instant depreciation of physical capital investment for small firms, increase the stamp (financial transactions) tax and excise taxes on alcoholic drinks

International Monetary Fund. European Dept.

deduction affect Belgian SMEs’ capital structure? ” Small Business Economics , Vol. 40 ( 2 ), pp. 351 – 373 . Waerzeggers , C. and C. Hillier , 2016 , “ Introducing a General Anti-Avoidance Rule (GAAR) ,” Tax Law IMF Technical Note , Vol. 1 ( 1 ), IMF Legal Department . Waerzeggers , C. and C. Hillier , 2016 , “ Introducing an Advance Tax Ruling (ATR) Regime ,” Tax Law IMF Technical Note , Vol. 1 ( 2 ), IMF Legal Department . 1 Prepared by Alexander Klemm, Shafik Hebous (both FAD), and Cory Hillier (LEG). This paper has been

Ms. Lucilla Mc Laughlin and John Buchanan
This technical note is provided as guidance to tax administrations that are considering a program to enhance the tax compliance of high wealth individuals. The note explains the rationale for a specialized compliance program for this segment of the taxpayer base and provides guidance on defining the population of wealthy individuals. Advice is also given on how to assess readiness for such a compliance program, taking into account the legal framework, the political environment, the availability of the necessary data and the administration’s capacity to implement it. The note then gives practical advice on implementing a high wealth individual compliance program, using the compliance risk management model as its foundation.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper on Chile seeks to explain why foreign ownership of locally issued sovereign bonds is so low in Chile and its implications. The low foreign ownership seems to be the result of a combination of macroeconomic, regulatory, and technical factors. The Financial Stability Report discusses the issue, and points to the tax on capital gains, costs for custody of securities and other administrative costs, and the relatively small size of the sovereign bond market as the reasons. Our study also finds that a combination of factors contributed to the low foreign ownership, including a moderate supply of sovereign bonds shadowed by strong local demand, illiquid secondary market, tax and administrative burden, the dominance of inflation-indexed bonds, and inconvenience and potential risks associated with foreign exchange transactions. The small size of the market for nominal bonds, the lack of a liquid secondary market, the previous tax regime and existing administrative burden, and transaction costs in the foreign exchange market seem to be the main reasons.
International Monetary Fund. European Dept.
This Selected Issues paper analyzes investment slowdown in Denmark. The post-global financial crisis (GFC) weakness in Denmark’s aggregate investment cannot be fully explained by the output slowdown. The baseline accelerator model confirms that output slowdown played a role, but post-GFC investment has fallen beyond the level explained by output movements in most of the post-GFC period. Most recently, investment converged to the level explained by output movements. The augmented accelerator model suggests that additional factors, such as high leverage, weak competition, and elevated policy uncertainty, also had a significant impact. Panel regressions using a panel of advanced economies show that reduction in leverage and product market reforms can boost investment in the medium term. Well-designed policies are needed to boost private investment.