Legislative Instrumentalism vs. Legal Principles in Tax Law

Abstract

Incentives in tax law are a means of exerting power and influence over taxpayers. Instrumentalist legislation usually underestimates the importance of legal principles in modern law. Legal principles are the normative core of a value oriented conception of law. They function as essential criteria of evaluation for lawmaking by the legislator and the executive. In fact, legislator, administration and judiciary, all active in framing the legal system, are bound by fundamental legal principles. Therefore, if the instrumentalist legislator evidently fails to implement these fundamental legal principles, judges may be obliged to review the law for compatibility with these principles. By giving a voice to legal principles the courts act as a countervailing power. Here, the judiciary should adopt a restrained attitude to preserve the dignity of legislation. Therefore, the judiciary has to leave the - democratically legitimised - legislature a (wide) margin of appreciation. However, the deference shown by the courts to the tax legislator may not go at the expense of an effective legal protection of the taxpayer in case of instrumentalist legislation which constitutes naked preferences.

Keywords: Regulation, incentives, instrumentalism, command theory of law, tax administration, testing of (tax) statutes, judicial restraint, legal principles and values, inner morality of law, Dworkin, Radbruch, Fuller