gerard@uwovax.uwo.ca (Gerard Stafleu) (08/22/89)
In article <1989Aug20.064223.26979@lsuc.on.ca>, dave@lsuc.on.ca (David Sherman) writes: > It [GAAR] doesn't make it "illegal to take advantage of loop-holes", > as such (certainly not in the sense of criminal or quasi-criminal > penalties). It provides, in effect, that where you misuse a > provision of the Act or abuse the Act in order to obtain a > "tax benefit", a court can make whatever order is necessary > to negate the effect of what you've done -- that is, for income > tax purposes, ignore the deduction or credit you've claimed, > allocate "your" income to some other taxpayer, or whatever. > The steps the court take are very broad, but you have to get over > the "misuse or abuse" hurdle to fall into GAAR. This is interesting. There is a sort of meta-law for legislation, which states that a law should not be retroactive. If you do something today that the government doesn't like, but there is no law against it, they can pass a law that forbids it tomorrow. What they can not do is pass a law that can punish you for an act that was legal when you did it. (I don't know if this rule is entrenched anywhere; I wouldn't be surprised if "they" had been careful not to put it in writing!) By the sound of it, the GAAR comes close to a piece of retroactive legislation. You do something that the law allows you to do, that is you do not break any laws. However, a judge can then decide that you shouldn't have done it, in spite of the fact that there is no law against it. And then he can punish you retroactively, by taking money away from you. Most people would agree that retroactive legislation is immoral. I wonder, does the GAAR show that tax legislation is inherently immoral (:-)?
dave@lsuc.on.ca (David Sherman) (09/25/89)
In article <3627@uwovax.uwo.ca> gerard@uwovax.uwo.ca (Gerard Stafleu) writes: >In article <1989Aug20.064223.26979@lsuc.on.ca>, dave@lsuc.on.ca > (David Sherman) writes: >> It [GAAR] doesn't make it "illegal to take advantage of loop-holes", >> as such (certainly not in the sense of criminal or quasi-criminal >> penalties). It provides, in effect, that where you misuse a >> provision of the Act or abuse the Act in order to obtain a >> "tax benefit", a court can make whatever order is necessary >> to negate the effect of what you've done -- that is, for income >> tax purposes, ignore the deduction or credit you've claimed, >> allocate "your" income to some other taxpayer, or whatever. >> The steps the court take are very broad, but you have to get over >> the "misuse or abuse" hurdle to fall into GAAR. > >This is interesting. There is a sort of meta-law for legislation, which >states that a law should not be retroactive. If you do something today >that the government doesn't like, but there is no law against it, they >can pass a law that forbids it tomorrow. What they can not do is pass a >law that can punish you for an act that was legal when you did it. >(I don't know if this rule is entrenched anywhere; I wouldn't be >surprised if "they" had been careful not to put it in writing!) It's not legislated anywhere that I know of, but it may be entrenched enough that it can be argued successfully in the right cases. It's clearly true in criminal law; one looks at the law as it was at the time you committed the act. Interestingly, however, tax changes are often retroactive to the date of the first public announcement of the change, such as a budget date or date of a press release. The actual legislation isn't enacted until many months later. Some provisions of the Income Tax Act explicitly apply to transactions taking place after 4:00 pm or 11:00 am Eastern Standard Time on a particular day! >By the sound of it, the GAAR comes close to a piece of retroactive >legislation. You do something that the law allows you to do, that is >you do not break any laws. However, a judge can then decide that you >shouldn't have done it, in spite of the fact that there is no law >against it. And then he can punish you retroactively, by taking money >away from you. That's not retroactive. GAAR is on the books now, and has been effective since September 13, 1988. The interpretation of any law in the tax system is always subject to the courts. GAAR is just a little more uncertain because it hasn't yet been interpreted. The judicial decision that "you shouldn't have done" something isn't arbitrary; it's based on the judge's interpretation of existing law. Your mistake is in saying "in spite of the fact that there is no law against it". There is a law, albeit one drafted in more general language than the specific anti-avoidance rules. David Sherman -- Moderator, mail.yiddish { uunet!attcan att utzoo }!lsuc!dave dave@lsuc.on.ca