An Overview of Tax Law and Concepts

AuthorVern Krishna
ProfessionProfessor of Common Law, University of Ottawa Barrister at Law
“We are about to consider the unpleasa nt subject of taxes.”1
“‘Basic Tax,’ as everyone knows, is t he only genuinely funny subject
in law school.”
— attributed to Martin D. Ginsburg
This chapter provides a broad overv iew of the income tax system, policy
objectives and constitutional lim its 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 legi slate; taxpayers seek to legally minimize
their tax bills.
Tax law has a reputation of being a diff‌icult and d ry subject. To
be sure, it is diff‌icult, but it is neither dr y 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.
Nevertheless, tax payers must live with the statute as it is and not
with the one that they w ish they had written. We must comply with
the law or face severe sanctions. Advi sors must advise on uncertain,
complex and poorly drafted provisions. Court s must interpret obscure
legislation in lengthy court battles that can extend over a decade.
All laws are ultim ately behavioural and nowhere more so than in
money matters. When governments take approximately one-half of
one’s earned income as tax, it is underst andable that taxpayers w ill
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 t ax law to implement social and
political policies. Thus, tax law balances different objectives: funding
public expenditures, promoting economic policies, providing regional
incentives, and redistr ibuting income. A statute that serves so m any
diverse and, often, conf‌licting pur poses is necessarily going to be more
complex than a narrow single pur pose statute.
As we work through this text, we should delve into the purpose of
statutory provisions and ask
• Is the provision “normative” and necess ary to accurately measure
inc ome?
• 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 a lmost
every principle of gramm atical 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 Ca nadian Act today:
. . . it sweats diff‌icultie s at every paragraph; ever y 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 horr if‌ied.
Shorn of its technical lang uage, however, the Act is an instrument of
policy that ref‌lects the soc ial, 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 sea rch 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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