Download This PaperFormalism and Israeli Anti-Avoidance Doctrines in the 1950s and 1960s
STUDIES IN THE HISTORY OF TAX LAW, John Tiley ed., pp. 339-77, Hart Publishing, 2004
21 Pages Posted: 15 Jul 2004 Last revised: 10 Apr 2020
Date Written: January 1, 2003
Abstract
Courts play a major role in fighting tax avoidance, but there are very few studies that attempt to explain the historical development of anti-avoidance doctrines. One rare exception has been a study of the history of British anti-avoidance doctrines in the first part of the 20th century that has argued that British judges adopted a formalist, pro-taxpayer approach to tax avoidance and that this approach was motivated by a desire to assist wealthy taxpayers to reduce their taxes. This paper examines the validity of a class-based interpretation of anti-avoidance doctrines in the Israeli context. The Israeli Income Tax Act contains a general anti-avoidance provision which the courts could have used to fight tax avoidance schemes. However, during the last decade of British rule in Palestine and the first two decades after Israeli independence in 1948, courts were reluctant to refer to this provision and instead adopted a form over substance principle. This formalism, however, was only partly the result of class-interests. It was also created by a host of other factors: legal, psychological, administrative and economic. One major reason for the formalist approach to tax avoidance was the fact that the newly-constituted Israeli tax authorities were at first unable to deal effectively with tax evasion, let alone with tax avoidance. Judges were, therefore, reluctant to intervene in cases of tax avoidance, which are often less clear-cut than cases of tax evasion. Class-interests, the paper concludes, may sometimes be a factor in the shaping of tax doctrines, but other, more practical considerations, such as the efficiency of the tax collection machinery, also play an important role.
Keywords: Tax, history, tax history, tax avoidance, anti-avoidance, tax evasion, tax administration, tax compliance, tax culture, Israel, United Kingdom, Britain, formalism, form and substance, statutory intepretation, tax interpretation, class, judges, legal history, law and society, jurisprudence
Suggested Citation: Suggested Citation