Tax Abuse - Lessons from Abroad

42 Pages Posted: 12 May 2012 Last revised: 13 Feb 2019

See all articles by Orly Mazur

Orly Mazur

Southern Methodist University - Dedman School of Law

Date Written: May 11, 2012


How does a government distinguish between tax planning and tax abuse? Most democratic societies agree that citizens have a right to limit their tax liability through tax planning. However, governments generally also agree that this right does not extend to tax abuse. Tax abuse substantially reduces government tax revenues and weakens the integrity of our tax systems and the efficiency of our economy. Thus, making this distinction between tax planning and tax abuse is critical. In an attempt to identify and counter tax abuse and its detrimental effects, the United States recently enacted an anti-abuse rule in Section 7701(o) of the Internal Revenue Code. Because tax abuse is difficult to legislatively define, Section 7701(o) relies heavily on the judiciary to make the ultimate determination of which transactions are abusive. This Article contends that the international experience with similar general anti-avoidance rules indicates that Section 7701(o) will not be a universal cure for tax abuse but can be an effective anti-abuse tool if certain judicial, legislative and administrative steps are taken. Therefore, it proposes a reform to Section 7701(o) that would counter the textualist trend and other judicial approaches that potentially undermine the statute while simultaneously increasing the statute’s fairness and predictability.

Keywords: tax abuse, GAAR, economic substance doctrine, Section 7701(o), Australian GAAR, New Zealand GAAR, Canadian GAAR, tax planning

Suggested Citation

Mazur, Orly, Tax Abuse - Lessons from Abroad (May 11, 2012). 65 SMU Law Review 551 (2012), SMU Dedman School of Law Legal Studies Research Paper No. 100, Available at SSRN:

Orly Mazur (Contact Author)

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States


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