An Overview of Tax Law and Concepts

AuthorVern Krishna
ProfessionProfessor of Common Law, University of Ottawa Barrister at Law
Pages3-31
3
CHAPTER 1
AN OVERVIEW OF TAX
LAW AND CONCEPTS
“We are about to consider the unpleasant subject of taxes.”1
“‘Basic Tax,’ as everyone knows, is the only genuinely funny subject
in law school.”
— attributed to Martin D. Ginsburg
A. THE NATURE OF TAX
This chapter provides a broad overv iew of the income tax system, policy
objectives and constitutional limits on the power to tax. Tax law in-
volves expropriating money from tax payers for governmental purpo ses.
Hence, there is a natural tension between the tax collector and the
taxpayer. Governments legislate; taxpayers seek to legally minimize
their tax bills.
Tax law has a reputation of being a diff‌icult and dry subject. To
be sure, it is diff‌icult, but it is neither dry nor unpleasant. Yes, tax
law is replete with obtuse language, has a great deal of technical detail
and is often incomprehensible even to the brightest minds. Albert Ein-
stein — an acknowledged genius — conceded: “The hardest thi ng in the
world to understand is the Income Tax.”
1 Louis Eisen stein, The Ideologies of Taxation (Cambri dge: Harvard University
Press, 2010) at 4.
INCOME TAX L AW4
Nevertheless, taxpayers must live with the statute as it is and not
with the one that they wish they had written. We must comply with
the law or face severe sanctions. Advisors must advise on uncertain,
complex and poorly drafted provisions. Courts must interpret obscure
legislation in lengthy court battles that can extend over a decade.
All laws are ultimately behavioural and nowhere more so than in
money matters. When governments take approximately one-half of
one’s earned income as tax, it is understandable that taxpayers will
expend considerable energy and resources devising creative ways to
minimize the government’s bite. Tax lawyers are always busy.
Revenue is an important, indeed imperative, justif‌ication of tax
law. However, governments also use tax law to implement social and
political policies. Thus, tax law balances different objectives: funding
public expenditures, promoting economic policies, providing regional
incentives, and redistributing income. A statute that serves so many
diverse and, often, conf‌licting pur poses is necessarily going to be more
complex than a narrow single purpose statute.
As we work through this text, we should delve into the purpose of
statutory provisions and ask
• Is the provision “normative” and necessary to accurately measure
income?
• Is the provision intended to promote social, economic or cultural policy?
• How effectively does the provision achieve its objective?
The Income Tax Act2 (the Act) is badly drafted and violates almost
every principle of grammatical construction. The comments of a mem-
ber of the British Parlia ment speaking about the Ir ish Home Rule bill in
1889 would equally describe the Canadian Act today:
. . . it sweats diff‌iculties at every paragraph; every provision breeds a
dilemma; ever y clause ends in a cul-de-sac; da ngers lurk in every line;
mischiefs ab ound in every sentence a nd an air of evil hangs over it all.
Our high school English teachers would be horrif‌ied.
Shorn of its technical lang uage, however, the Act is an instrument of
policy that ref‌lects the social, political, economic and moral values of so-
ciety. Thus, the statute evolves as our values and policies change. There is
a reason or purpose underlyi ng every provision. The rationale is there for
those who make an effort to search for it. As Frankfurter J said:
Legislation h as an aim: it seeks to obviate some mi schief, to supply an
inadequacy, to effect a change i n policy, to formulate a plan of Govern-
2 RSC 1985, c 1 (5th Supp) [ITA].

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