👨⚖️ What is the link between bright-line tests and tax avoidance?
In a paper titled “Judicial Line Drawing and Implications for Tax Avoidance” and recently published in the Canadian Tax Journal, Ivan Ozai explores the differences between bright-line and what he calls “multifold” rules in tax legislation. The author categorizes these into bright-line and multifold “antecedents” (the test or set of factual circumstances that results in the application of the rule) and bright-line or multifold “consequents” (the legal consequence of the rule).
In the author’s words, “bright-line antecedents become troubling when the taxpayer’s choice results in circumventing the core concept on which the law is based”. He analyzes key precedents from the Supreme Court of Canada to make the point that judges have been relying on other “misplaced” standards (e.g., substance over form, economic substance) to address what is ultimately a legal design issue. “The lack of comprehensive understanding of the functioning of multifold rules has led to a misleading discussion in case law that, although relevant, is inappropriate for addressing this issue,” he adds.
You can find Ozai’s paper available for free on SSRN: https://lnkd.in/dDTyrKvp
If you are interested in this or related topics, here is a list of supplementary sources recommended by the Latin American Tax Policy Forum (LATPF):
✅ “Estudo comparativo sobre o combate ao planejamento tributário abusivo na Espanha e no Brasil: Sugestão de alterações legislativas no ordenamento brasileiro” (“Comparative study on combatting abusive tax planning in Spain and Brazil: Suggestion of legislative changes in the Brazilian legal system”), by Marciano Seabra de Godoi (2012). Available in Portuguese at: https://bit.ly/3wLVUV7
✅ “Taxatividad tributaria, elusión y seguridad jurídica: criterios para una evaluación” (“Tax Typicality, criminal typicality, and legal certainty: criteria for an evaluation”), by Hugo Osorio Morales (2023). Available in Spanish at: https://bit.ly/3TkTHZG
✅ “Planificación Fiscal Agresiva, el nuevo paradigma de la norma de precios de transferencia y la elusión en el Código Tributario” (“Aggressive Tax Planning, the new paradigm of the transfer pricing rule and avoidance in the Tax Code”), by Walker Villanueva (2017). Available in Spanish at: https://bit.ly/434OAQw
✅ “Indeterminacy, Complexity, Technocracy and the Reform of International Corporate Taxation”, by Sol Picciotto (2015). Available at: https://lnkd.in/euvVdzAi
✅ “La inconstitucionalidad de la sanción a la elusión fiscal: una revisión crítica de sus fundamentos” (“The unconstitutionality of the penalty for tax avoidance: a critical review of its foundations”), by María Pilar Navarro (2019). Available in Spanish at: https://bit.ly/48DWbqw 🌎🌍
