For clarity of debate, I offer the below. It can be read together with my earlier posts today on the GAAR Penalties Regime which are here and here.

The GAAR catches transactions in (7). It doesn’t catch people transacting in (4), (5), (6) or (8).

Without a GAAR specific penalties regime, the GAAR does not always create an effective disincentive to transacting in (7). People can transact and take a punt on escaping a GAAR counteraction. For many there will be but modest downside to a counteraction – some hassle and professional fees but with a huge potential tax gain. The same is even more true for those transacting in (6).

With a GAAR specific penalties regime, no one will transact in (7). People will absolutely be put off transacting in (6). I think these are ‘pro’s. The potential ‘con’ is whether people would be put off transacting in (5). I think not because I think (6) creates ample clear water between (5) and (7).

CLASSES OF AVOIDANCE TRANSACTION