Principles-based Tax Drafting and Friends. On Rules, Standards, Fictions and Legal Principles
In: A. Sawyer, L. Oats, and D. Massey (eds.), Contemporary Issues in Tax Research (Volume 4), Birmingham: Fiscal Publications 2021, p. 165-206
43 Pages Posted: 11 Oct 2021
Date Written: October 9, 2021
Tax complexity is a multi-faceted and pervasive phenomenon. Narrow, detailed drafting of the law is a particular manifestation of tax complexity. Tax legislatures often try to control and regulate every conceivable situation by issuing very specific rules covering the full range of circumstances. The result is a tax system is populated by dense thickets of often thorny rules, which lacks transparency and goes at the expense of certainty and equality.
Principles-based legislation is sometimes termed as an alternative regulatory instrument to counter both the complexity of detailed tax drafting and tax avoidance. However, it should not be seen as a magic formula but rather as a helpful addition to the legislature’s toolbox.
In this article we will elaborate on principles-based legislation, rule-based drafting, and two other drafting styles - legal fictions and standards. We investigate these three ‘friends’ as alternatives, or supplements, to precise rules from the perspective of (legal) principles as advocated by the legal philosopher Dworkin.
It will be argued that securing the integrity of tax law requires a balancing act between different legislative drafting styles such as fictions, standards and principles-based legislation.
Keywords: Tax complexity, principles-based legislation, rule-based drafting, legal fictions, standards, legal principles, transparency, legal certainty, equality
JEL Classification: K34
Suggested Citation: Suggested Citation