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General Anti-Avoidance Rule (GAAR)

A broad and general rule enacted in the tax code that is aimed at preventing or counteracting abusive tax avoidance arrangements and opportunities. In the official documents of HM Revenue and Customs in the UK this is referred to as the General And-Abuse Rule. Abusive tax avoidance occurs when an activity has no economic justification other than to reduce the amount of tax paid. GAAR regimes differ across countries; one important target area of GAAR is base erosion and profit shifting (BEPS). An anti-avoidance rule that applies in a specific situation, for example, in transfer pricing regulations, is referred to as a Specific AntiAvoidance Rule (SAAR). SAARs are typically intended to deny tax exemptions or reliefs, or tax benefits firom losses.

Reference: Oxford Press Dictonary of Economics, 5th edt.