General anti-avoidance rules and the rule of law

• Main Author: OOI, Vincent
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Tax Law; Taxation; General Anti-Avoidance Rules; Jurisprudence; Rule of Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/3167; https://ink.library.smu.edu.sg/context/sol_research/article/5125/viewcontent/Poster_1.pdf
• Institution: Singapore Management University

General Anti-Avoidance Rules (“GAARs”) grant tax authorities wide powers to counteract tax avoidance transactions notwithstanding that the taxpayer may have complied with the strict letter of the law. These wide powers raise questions of possible conflicts with fundamental principles such as the Rule of Law, and Distributive and Corrective Justice. The main difficulty arises in attempting to reconcile the need for a GAAR to apply to unpredictable and rapidly developing situations, and the principle of certainty as one of the foundations of the Rule of Law. This paper begins by defining tax avoidance, establishing a moral duty to pay tax and the scope of that duty. It then addresses the effects of GAARs and analyses them in relation to the Rule of Law. The paper then stakes out the extent to which GAARs support the Rule of Law, thereby establishing the limits by which GAARs should operate. From this, it then argues that GAARs are only really ever justifiable in cases of extreme tax avoidance. A subjective test should therefore be adopted in the application of GAARs. In this regard, the “thin ice” principle may be adopted.