The purpose of this page and pages linked from it is to explore the legal aspects of tax avoidance and, in particular, general and specific anti-avoidance rules such as Australia's Part IVA. Anti-avoidance rules generally involve a discretion, exercisable by the tax authority, to ignore or 'reconstruct' a transaction and thereby apply the tax law to a taxpayer as if the facts were different to reality.
The term 'tax avoidance' is used as on the following spectrum, which is commonly used in Australia:
- tax planning - structuring a transaction so as to take advantage of benefits intentionally provided by the law;
- tax avoidance - structuring a transaction so as to take advantage of loopholes in the law, contrary to its 'spirit', especially when using artificial, blatant and contrived steps;
- tax evasion - involves dishonesty e.g. factual misstatement on tax return understating income.
It may be argued that the words used in discussion of the terms 'tax planning' and 'tax avoidance' purport to refer to the legislative intent but in fact do not rely on the legislature as a source of information about policy or values at all; rather, they are a smokescreen for a completely subjective case-by-case policy decision about which transactions should attract taxation or not (a 'smell test'), resulting in arbitary taxation. If the values hidden in the exercise of the smell test could be teased out and crystallised into workable principles, then substantive tax legislation could be designed in a manner that made tax avoidance impossible without the need for anti-avoidance rules. It is likely that the 'tax avoidance problem' is in fact a symptom of a yawning (but obscured) gap between what people want in a tax system and the actual design of the tax system, created and exacerbated by a lack of real engagement between the public servants responsible for designing tax legislation and the elected representatives of the people; on this view, tax avoidance becomes a problem of tax law design.
Key questions[edit | edit source]
- What is the line between (permissible) tax planning and (impermissible) tax avoidance?
- What are the various perspectives or views on tax avoidance, what is their history and what are their philosophical underpinnings?
- By what means can substantive tax legislation be drafted in a manner that obviates the need for anti-avoidance rules?
By jurisdiction[edit | edit source]
Issues[edit | edit source]
- Tax avoidance/Purposive interpretation of tax legislation in order to defeat tax avoidance
- Tax avoidance/Fiscal nullity doctrine (TODO: Check whether this is just an instance of the 'purposive interpretation' approach)
- Tax avoidance/General anti-avoidance rule
- Tax avoidance/Transfer pricing
- Tax avoidance/Reconstruction of transactions