Abstract

http://ssrn.com/abstract=1650363
 
 

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The Morality of Tax Avoidance


Zoë M. Prebble


University of British Columbia - Faculty of Law; University of Michigan Law School - LLM Candidate; New Zealand Law Commission

John Prebble


Victoria University of Wellington - Faculty of Law; Monash University; Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien

2010

Creighton Law Review, Vol. 43, No. 3, pp. 693-745, 2010
Victoria University of Wellington Legal Research Paper No. 9/2012

Abstract:     
If “tax avoidance” means “contriving legal transactions that reduce tax in ways that are contrary to legislative policy”, then “evasion” is illegal reduction and “mitigation” is unexceptionable reduction. Apparently, tax avoidance may occur endogenously, within the existing economic framework of a business or an estate plan, or exogenously, by resort to an independent tax shelter. The distinction is apparent, but not real. (a) Whether an arrangement amounts to avoidance and, if so, (b) whether the avoidance is moral are fundamentally the same questions in all contexts, including estate planning. Judges sometimes claim that tax avoidance is moral. That claim appears to be based on the distinction that avoidance is legal whereas evasion is illegal. A legal/illegal test cannot determine questions of morality. Others who aver that tax avoidance is moral base their claims on four assumptions: that taxpayers have a moral right to their pre-tax income; that avoidance is a victimless activity; that the immorality of evasion is derived solely from its illegality (and therefore that avoidance, which has the same factual matrix, is moral); and that morality is wholly independent of the law. These assumptions are mistaken. Evasion is immoral in a deep sense, not simply as malum prohibitum. Since evasion and avoidance share their essential elements, and are separated only by a legal difference, it follows that avoidance is also immoral. Public opinion can test this conclusion, albeit imperfectly. The approach is deontological, focusing on actions, not on agents, and comparative, drawing on cases from several jurisdictions.

Number of Pages in PDF File: 54

Keywords: Income Tax Law, Tax Shelters, Anti-Avoidance, Morality, Estate Planning, malum in se, Tax Evasion, Tax Avoidance, Ethics, Duke of Westminster, Learned Hand

JEL Classification: K34

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Date posted: July 29, 2010 ; Last revised: April 8, 2014

Suggested Citation

Prebble, Zoë M. and Prebble, John, The Morality of Tax Avoidance (2010). Creighton Law Review, Vol. 43, No. 3, pp. 693-745, 2010; Victoria University of Wellington Legal Research Paper No. 9/2012. Available at SSRN: http://ssrn.com/abstract=1650363

Contact Information

Zoë M. Prebble
University of British Columbia - Faculty of Law ( email )
1822 East Mall
Vancouver, British Columbia V6T 1Z1
Canada
University of Michigan Law School - LLM Candidate ( email )
Ann Arbor, MI
United States
New Zealand Law Commission ( email )
Wellington
New Zealand
John Prebble (Contact Author)
Victoria University of Wellington - Faculty of Law ( email )
PO Box 600
Wellington, 6140
New Zealand
+64 4 463 6311 (Phone)
Papers Indexed at HOME PAGE (Fax)
HOME PAGE: http://www.victoria.ac.nz/law/staff/prebble-scholarly.aspx

Monash University
Victoria 3084
Australia

Monash University Business and Economics Logo

Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien ( email )
Welthandelsplatz 1
Vienna, Wien 1020
Austria

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