THE INCOME TAX ACT, THE RULES OF INTERPRETATION AND TAX AVOIDANCE, PURPOSE VS PLAIN MEANING: WHICH, WHEN AND WHY?
AbstractThe Bon-Secours codification confirms that legislative purpose has a role to play in the interpretation of taxing statutes. Plain meaning is a safe and predictable harbour. Dickson C.J.'s exhortations in favour of purpose are not particularly easy to implement (either in the context of interpreting the Charter or in the context of interpreting the Income Tax Act). So the question becomes, when must we forsake plain meaning for purpose? The solution begins with Estey J.'s ruminations in Stubart itself. Estey J. has suggested that the Income Tax Act serves three potential "state interests ". These are, 1) the raising of revenue to fund government, 2) the achievement of equity among taxpayers in the raising of that revenue and 3) the achievement of fiscal and social policies unrelated to the raising of revenue. If the provision under scrutiny speaks primarily to state interest one (the normative tax structure), an investigation of legislative purpose maybe necessary. If the provision speaks to state interests two or three, a plain meaning interpretation should suffice. If purpose it must be, then the Report of the Royal Commission on Taxation provides an authoritative exposition of both the Canadian tax law evolution prior to 1966 as well as the public policy choices considered by the Department of Finance and the legislators prior to the enactment of the 1971 Act. "Context" is the key to the Supreme Court's purpose-based interpretation of the Charter and context will become the key to a purpose-based interpretation of our normative tax structure. Seemingly contradictory tax avoidance cases make more sense once it is accepted that in state interest one terrain the interpretation exercise should focus on identifying the contextual factor that is determinative. The author proposes several factors to be treated as determinative in the interpretation of certain aspects of our income tax regime. Today our judges are being asked, in certain circumstances, to create law based upon the public policy underpinnings that Parliament has determined should animate the law. So long as our tax courts identify the contextual factors that are determinative and provide transparent reasons for judgment that enumerate the public policy choices, this should be a rewarding time for tax court judges charged with doing their job based on: "empiricism not dogmatism, imagination rather than literalness".
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