Collecting Taxes : A Commentary

This article examines scholarly articles by Mr Robert Mcleod and Dr Geoffrey Hartly that appear earlier in this volume. The author finds that individually, the articles are very welcome contributions to tax law scholarship but together, the articles afford valuable insights into several characteristic of income tax law that are often obscure. An example is the “no halfway house” axiom. The juxtaposition of Mr Mcleod's economic analysis and Dr Harley's study of an illuminating group of non-tax cases and their application to tax law illustrates a curious irony: that the discipline known as “law and economics” has had little to offer to the courts' approach to fundamental principles of income tax law. This is because it is the legal substance of a transaction that determines whether it should be taken into account in calculating taxable income, not the economic reality of the transaction. This feature of tax law typically leads to a loss of government revenue. The legislature then responds by making amendments to tax statues that recharacterise the results of the courts' legal analysis. The qualities of income tax law that cause courts to spurn the analysis of law and economics in the characterisation of judicial concepts have analogous effects in other areas, such as statutory interpretation