General Anti-avoidance Rules (GAAR)

Tax avoidance began to be targeted through a widely applicable instrument that came under the rubric, general anti-avoidance rules (GAAR). While each SAAR targets a single tax avoidance behaviour, GAAR is designed to target a broad spectrum of tax avoidance. The popularity of GAAR increased with growing disappointment among policymaking authorities regarding low tax contributions by services sector multinational enterprises (MNEs), particularly in the e-commerce sector, during the global economic crisis of 2008–2009 when revenue needs for public expenditure were at an all-time high. This feeling redoubled as SAARs were considered insufficient to capture tax avoidance comprehensively. GAAR enables wider scrutiny of intra-group MNE structures that are considered unacceptable. Cross-country GAAR legislation is found in a number of jurisdictions. This chapter reviews examples of GAAR across countries ranging from advanced economies such as Australia, the European Union (EU), the United Kingdom (UK) and the United States (US) to the emerging economies of Brazil, China and South Africa. A case study of India is included, that explores the core tensions—between the justifiable elements and the overzealousness of the tax authorities—in the emergence of the Indian GAAR originally introduced in 2012, then put in abeyance, and finally legislated in 2017.