Certainty and Uncertainty in Tax Law: Do Opposites Attract?
2. Principle of Certainty of Taxation Is the Fundamental Principle of Tax Law
2.1. Certainty Is a General Requirement to Legal Norms
2.2. Why Is the Principle of Certainty So Important in Tax Law
2.3. The Content of the Principle of Certainty of Taxation
2.3.1. Preciseness and Clarity
2.3.2. Understandability and Accessibility
2.3.3. The Balance of Abstract and Concrete
2.3.4. Completeness, Internal Consistency, Coherence
2.4. The Role and Significance of the Principle of Certainty of Taxation
3. Uncertainty in Tax Law: Causes and Consequences
3.1. The Reasons for Uncertainty in Tax Law
3.2. Relatively Determined Legal Tools in Tax Law
3.2.1. Principles of Taxation
3.2.2. The Vague (Evaluative) Terms and Concepts
3.2.3. Open-Ended Lists
3.2.4. Anti-Avoidance Rules
3.2.5. Qualified Silence of the Law
3.2.7. Presumptive Taxation
3.2.8. Intermediate Conclusions
3.3. The Principle of Resolving Doubts in Favor of Taxpayer
Conflicts of Interest
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See Leoni (1972) (The author comes to the conclusion that the rule of law, in the classical sense of the expression, cannot be maintained without actually securing the certainty of the law, conceived as the possibility of long-run planning on the part of individuals in regard to their behavior in private life and business). See also Hayek (1960) (It is proclaimed that “the importance which the certainty of the law has for the smooth and efficient running of a free society can hardly be exaggerated. There is probably no single factor, which has contributed more to the prosperity of the West than the relative certainty of law which has prevailed here”).
Recall one of the four Adam Smith’s maxims: “The tax which each individual taxpayer is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person” (Smith 1937, p. 371).
Gribnau (2013) (analyzing the positions of Joseph Raza, comes to the conclusion that an important principle connected to the ideal of legal certainty is that laws should be relatively stable; frequently changing laws hamper people in finding out what the law is at any given moment and they will not be sure the law has not been changed since the last time they learnt what it was).
See Bertea (2008) (“Law and certainty are widely regarded as conceptually connected. By subjecting action to normative standards, the law limits the range of permissible conduct, thus reducing social contingency and superimposing an order on human interactions that would otherwise be less predictable and even potentially chaotic. So the very act of setting up a legal order reflects, among other things, a demand for certainty. … Certainty, thus, is not just one among several ideals by which legal practices can be assessed; it is rather a fundamental value of the legal domain”). See also Radbruch (1950).
For the first time this, principle was mentioned in the ECHR Judgement in the case Golder v. UK, and concerned the inadmissibility of the broad interpretation of the European Convention on Human Rights (Golder v. UK (Application No. 4451/70), Judgment of the ECHR, 21 February 1975). The second Judgement, which mentions this principle, is the Judgement in the case “The Sunday Times v. The United Kingdom” (The Sunday Times v. The United Kingdom (Application No. 6538/74), Judgment of the ECHR, 26 April 1979). The third Judgement mentioning the principle of legal certainty banned retroactivity of court judgements (Marckx v. Belgium (Application No. 6833/74), Judgment of the ECHR, 13 June 1979).
See, e.g., Bingham (2007) (the main component of the rule of law is that “the law must be accessible and so far as possible intelligible, clear and predictable”); Maxeiner (2008) (“Legal certainty is a central tenet of the rule of law as understood around the world”); Maxeiner (2006) (“The rule of law … requires that rules of law be clear and consistent and that their application be sure and predictable. When that is true, law-abiding people can know what the law is and can orient their conduct on what it requires”); Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 72 (“There are many conceptions of the rule of law, but the principle of legal certainty is generally recognized to be a key ingredient of it”); Morse (1999); Pagone (2009) (“Certainty in the law is fundamental to the rule of law, which holds that law should be clear, easily accessible, comprehensible, prospective rather than retrospective, and relatively stable”).
Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 70 (“Rules play an important role in the human need for certainty. Rules offer structure, regularity, stability, reliability and predictability. Law as a body of rules aims at sharing these virtues. Legal rules enhance certainty of law”).
See Marmor (2018) (It is noted that vagueness in legal language can arise in many different contexts: in legislation or agency regulations, in constitutional documents, in judicial decisions, in private contracts, and wills, etc.) According to legal positivism, law is certain if the contents of general legal rules are knowable in advance, and public officials apply those rules uniformly and constantly to the effect that legal decisions can be said to be roughly predictable (Bertea, Stefano, Op. cit., pp. 28–30). See also Raz (1979).
Notifying the difficulties in identifying the content of the concept “legal certainty”, Vanessa Mak defines this concept as “the predictability of outcomes in legal disputes” (See Mak 2013).
In the same sense, we can add such a requirement of legal certainty as non-retroactivity.
In this context, Gustav Radbruch concludes that the legal language had the opportunity for its own independent development only after separation from other areas of culture and accordingly acquired a special aesthetic identity. The latter is based on the rejection of the numerous aesthetic values of the language. The language for law is cold, since it abandoned the language of senses. (See Radbruch 2004).
See, e.g., Ignatov v. Russian Federation (Application No. 27193/02), Judgment of the ECHR, 24 May 2007; Soloviev v. Russian Federation (Application No. 2708/02), Judgment of the ECHR, 24 May 2007; Melnikova v. Russian Federation (Application No. 24552/02), Judgment of the ECHR, 21 June 2007; Shukhardin v. Russian Federation (Application No. 65734/01), Judgment of the ECHR, 28 June 2007; and many others.
See Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 69 (“People value legal certainty. Predictability of law protects those subject to the law from arbitrary state interference with their lives. Legal certainty enables people to plan their future”).
These positions are generally recognized in legal science. Thus, Friedrich August von Hayek has convincingly shown that clear and definite legal norms are immanently necessary for a free society based on the ideas of liberalism and a market economy (Hayek 1960). According to Ofer Raban, clear and determinate legal rules allow people to know where they stand (and where they should not stand) and therefore allow them to maximize their freedom (Raban 2010). Uncertainty of tax norms as Thorsten Jobs highlights, leads to the fact that citizens as taxpayers cannot, with the help of laws, foresee and calculate in advance whether they will be taxed and in what amount, and what exactly they are forbidden and what penalties are imposed in case of tax evasion (Jobs 2006).
See Vasconcellos, R.P., Op. cit., p. 4 (“Almost every person has to deal with taxes at some point in their lives. Hence, the need for less uncertainty in this field is stronger than in any other”).
See Pagone, Gaetano, Op. cit., p. 887 (“Tax falls upon us in the ordinary course of our activities as a compulsory taking from us of something that we, by definition, have earned or owned. How and when that may happen should be clear, predictable and free from whim, caprice or chance”).
Cf.: Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 93 (“Taxes constitute an interference with taxpayers’ liberty. … Established laws which offer certainty are a great security for the liberty of the taxpayers, for lack of certainty in tax legislation may leave them in the dark with regard to their fiscal rights and obligations”).
Ibid, p. 87 (Legislators can craft laws with different levels of specificity to guide human behaviour, incorporating detailed rules or more general standards in the laws they write).
Bull v. United States, 295 U.S. 247, 259 (1935).
Many authors stress out the increased complexity of tax law; See, e.g., Blank and Osofsky (2017); Raskolnikov (2013); Zelenak (2010); Givati (2009); Vasconcellos (2007); Pollack (1994); White (1990).
See Pouga Tinhaga (2013) (essay demonstrates that tax complexity is necessary for tax fairness through analysis of tax systems throughout the world).
See Evans et al. (2011) (“The complexity of tax law, like the complexity of the commercial world to which it applies, often seems to increase in an exponential fashion, placing ever more pressure on taxpayers, tax advisers and tax administrators”).
Sometimes the term “legislative inflation” is used to describe the mass changes introduced into tax legislation (Eng 2002) and “constant flux of tax laws” (Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 91). Gribnau ironically notices: “Consequently, tax laws nowadays look like throw-away articles and tax legislation is unstable” (Ibid).
See Givati, Y., Op. cit., p. 146 (it is stated that the frequent changes in tax law are source of tax law uncertainty).
See Demin (2011b) (numerous observations suggest that along with the instincts of survival, domination, and procreation, proprietary aspirations determine the essence of homo sapiens. In our view, the sense of ownership is manifested in the form of a powerful instinct that is embedded in the human nature).
Gribnau, Hans, Legal Certainty: A Matter of Principle, pp. 80–81 (“Taxation is an interference with the right to enjoyment of property. In tax law, therefore, this certainty regards the “reach” of tax law and the inroads upon taxpayer’s property right and economic freedom, i.e. certainty with regard to his tax burden”).
Of course, the significance of these factors is great for effective collection of taxes, and they should always be taken into account in assessments of tax compliance (See, e.g., Williamson 2017). I assert only that they cannot be fully relied upon when collecting taxes.
See Edmiston, K., Mudd, Sh., and Valev, N., Op. cit., pp. 4–6 (problems under consideration connected with costs of complexity and uncertainty in the tax structure).
Takis Tridimas highlight that “legal certainty is by its nature diffuse, perhaps more so than any other general principle, and its precise content is difficult to pin down” (Tridimas 2006).
See, e.g., Decision of the Constitutional Court of Russia of 12.07.2006 NO 267-O. Bulletin of the Constitutional Court. 2006. NO 6. See also, Decision of the Constitutional Court of Russia of 06.04.2004 No. 7-P (“The adopted laws should be defined both in content and subject, purpose and scope of action, legal norms—formulated with sufficient preciseness, allowing the citizen to conform with them their behavior, both prohibited and permitted. Incomprehensible and contradictory legal regulation generates arbitrary law enforcement that violates these constitutional principles”).
See Bergel (1988) (“A legal terminology must be, above all, precise and exact. Certain concepts are identified by technical terms; common terms have generally acquired a proper legal meaning. But, each word should be a label through which one can identify with certainty one single concept. Polysemies must be avoided because they generate serious uncertainties and ambiguities”).
On the correct note of Roberto Vasconcellos “complexity leads to uncertainty and makes any legal rights and duties taxpayers may have unclear. … If legislation is to be applied to everyone, it should be made simple so people can understand it without having to spend more time and money” (Vasconcellos, R.P., Op. cit., pp. 18, 33). The tax law, echoed Klaus Vogel, if it is so complex that even a professional is not able to understand its meaning, it not only cannot be fairly applied by government bodies, but contradicts the principle of the legislator’s devotion to the idea of law as well (See Vogel 1994, p. 127).
Olsson v. Sweden (Application No. 10465/83), Judgment of the ECHR, 24 March 1988.
See Liu and Liu v. Russian Federation (Application No. 42086/05), Judgment of the ECHR, 6 December 2007.
See Joshua D. Blank & Leigh Osofsky, Op. cit., pp. 192–94.
In this context, it would be appropriate to cite the judgment of Herbert Hart: “in fact all systems, in different ways, compromise between two social needs: the need for certain rules which can, over great areas of conduct, safely be applied by private individuals to themselves without fresh official guidance or weighing up of social issues, and the need to leave open, for later settlements by an informed, official choice, issues which can only be properly appreciated and settled when they arise in a concrete case” Hart (1994).
Gribnau, Hans, Legal Certainty: A Matter of Principle, pp. 71–72 (“This general law is opposed to any kind of individual command (rule of men). It is an abstract rule which does not mention particular cases or individually nominated persons, but is issued to apply to all cases and persons in the abstract. Law conceived as a general and abstract norm is attributed the intrinsic virtue of promoting certainty, equality, and liberty. With regard to legal certainty, the capacity of law to provide certainty depends its abstractness, which is a purely formal characteristic of law”).
Regarding the problem of the optimal abstractness of legal norms, R. David draws attention to the fact that the balance between the application of the norm in a specific situation and the general principles of law does not necessarily have to be the same in all areas of law: a great concretization is desirable in tax law, where they try to minimize the arbitrariness of the administration. On the contrary, a greater degree of generalization is necessary in some other areas where there is no need to strictly enforce rigid legal decisions (David and Brierley 1978).
Speaking of tax rules as consistent and coordinated with other legal rules, James Maxeiner acertains: “Legal rules are internally consistent. They are routinely coordinated with other legal rules of the same jurisdiction and with rules of other jurisdictions” (Maxeiner, James R., Some Realism About Legal Certainty in the Globalization of the Rule of Law, p. 40).
See Schwartzstein (1996) (“Uncertainty and instability of the tax legislation inevitably results in less investment, lower returns to investments and slower economic growth for the economy as a whole”).
See Edmiston et al. (2005) (the present study indicate that complexity and uncertainty, in the sense of multiple tax rates, indeterminate language in the tax law, and inconsistent changes in the tax laws have a significant negative effect on inward foreign direct investment).
See Vasconcellos, R.P., Op. cit., pp. 3, 33 (“Judges in tax judicial review should not assume that the State rights are more important than the private rights. Both have to be outweighed in each case. … The idea of public interest can be misleading. It should not be seen as synonym of the state’s interest, or the Treasury’s interest. In fact, public interest can sometimes be found to be the same as the individual interest or the tax authority’s interest. It should represent a fair balance of both interests at stake. The technical and impartial application of the law is part of the public interest. Therefore, there is no principle of superiority of the state’s interest”).
Scott Baker and Alex Raskolnikov state that “few things are certain in life, and the legal system is not one of them. In a perfectly certain world, all laws would be clear, their application to the facts in each case would be unambiguous, as would be the facts themselves, all violations would be detected and punished, and sanctions would be fixed and known to everyone in advance. The reality, of course, is very different” (Baker and Raskolnikov 2017).
In this context, Hans Gribnau writes: “the law never offers absolute legal certainty. It is only capable of providing limited certainty. ... Therefore, some uncertainty about the meaning of the law is inevitable. Absolute legal certainty, therefore, does not exist. Absolute legal certainty would mean that law and society at large would come to a halt. Therefore, some uncertainty about the meaning of the law is inevitable” (Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 82). See also Kelsen (1992) (it is argued that certainty is a legal ideal, not a trait that systems of law necessarily possess).
See Baker and Raskolnikov (2017) (“Uncertainty is pervasive and persistent in any legal system. It comes in many forms, and it frequently reflects lawmakers’ choices, whether deliberate or not”).
Yehonathan Givati names three types of possible manifestations of uncertainty in tax law: ambiguity concerning the precise meaning of statutory language, ambiguity concerning the application of the law to a specific factual situation, and ambiguity concerning the type of evidence sufficient to establish necessary specific factual situation, and ambiguity concerning the type of evidence sufficient to establish necessary facts (Givati, Y., Op. cit., p. 144). See also Long and Swingen (1991).
See Christie, George, Op. cit., p. 911 (it is argued that vagueness is an inescapable aspect of our language and that vagueness is not always a hindrance to precise and effective communication; vagueness is sometimes an indispensable tool for the achievement of accuracy and precision in language, particularly in legal language; vagueness in legal language has also given our law a much needed flexibility).
Cf.: Abreu, Alice and Greenstein, Richard, The Rule of Law as a Law of Standards, p. 92 (“The Internal Revenue Code does not ‘read itself.’ All applications of the Code require interpretation”).
See Pagone, Gaetano, Op. cit., p. 887 (“Uncertainty may in part be an inevitable feature of language. Words are frequently capable of many meanings, some of which were not, or at least may not have been, intended when used in a particular context”).
Cf.: Osofsky (2011) (“There are a number of sources of tax law uncertainty. Prevalent use of standards in the tax law may leave taxpayers unsure of the application of a standard to a particular set of facts. Tax rules often also create uncertainty. Incredibly complex tax rules may have small but gaping holes, leaving application of the rule uncertain”).
See Joseph Raz’s argument that rules and principles do not exist as distinctly separate standards, but they exist on a spectrum of standards of varying degrees of specificity (as quoted by McGarry (2017), p. 22). Mark van Hoeck, comparing general principles and precise rules, concludes: “In practice, there is no clear cut distinction between what is concrete enough to be considered to be a “rule” and what is general enough to be a “principle”. It is a matter of gradation” (van Hoeck 2002, pp. 160–61).
According to H.L.A. Hart’s correct remark, whatever norms (laws, precedents) we have chosen to communicate common patterns of behavior, in some specific situations they will always have what the scientist calls open texture of law. In this case, according to Hart, general legal terms have a core of certainty and a penumbra of doubt (Hart 1994, pp. 123, 128).
See Bertea, Stefano, Op. cit., p. 32 (it is claimed that a law that can be qualified as certain provides uniform and entrenched generalizations that are relatively blind to the specificity of individual cases).
See Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 87 (“Precision increases predictability. However, regulation through precise, specific rules does not always deliver optimal legal certainty”).
See Pashkevich (1982), p. 55 (“The lack of normative regulation or deficits in laws produce such negative effects as the disorganization of the public relations and the dangerous tyranny of bureaucracy. But there are also negative consequences in the case of overregulation, when the legal system has a lot of the redundant laws, over-detailed regulations, excessive formalization and bureaucratization, and so on”).
According to Friedrich Schauer’s justified remark, the most precise rules are always potentially inaccurate, as a consequence of our imperfect knowledge of the world and our limited abilities to foresee the future (Schauer 1993).
Even the most precise rule, Hans Gribnau emphasizes, may be uncertain when faced a situation that the legislator did not foresee at the time of laying down this rule (Gribnau 2007).
Criticizing the legislator’s hyperactivity, Walter Schwidetzky writes that as a result of excessive lawmaking “complexities are piled on top of complexities. Attempts to eliminate ambiguities rarely succeed; a law that resolves one ambiguity typically spawns many more. This whole process stems from the deluded belief that it is possible to have a perfect legal system. It is not. Humans are imperfect, and therefore so will be anything they create” (Schwidetzky 1996).
See, e.g., Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 88 (“However, it is not always possible to formulate the subject matter that the law deals with in neatly tailored clear rules, or to mould it into precise concepts. Thus, the legislator may deliberately formulate rules (too) broadly, leaving it up to the courts or the tax authorities to tailor the rule more precisely”).
See Maxeiner, James R., Legal Indeterminacy Made in America: U.S. Legal Methods and the Rule of Law, pp. 522–23 (“[r]ules often intentionally grant those charged with applying them the authority to make value judgments. In such cases, rules provide only general limits, but no single correct answer”).
See Baker et al. (2004) (“The findings suggest that, within an efficiency framework, there are virtues to uncertainty that may cast doubt on the premise that law should always strive to be as predictable as possible”).
Cf.: Marmor, A., Op. cit., p. 561 (“Vagueness in the law, as elsewhere, comes in different forms. Some of it is unavoidable, while other cases are optional and deliberately chosen by lawmakers”).
See Raban, Ofer, Op. cit., pp. 177, 179 (“And in fact, clear rules are bound to produce less certainty and predictability than vague standards in many areas of the law. … As delineated above, capitalism and liberalism require the latter, not the former: what we want is a certain and predictable regulative environment (a predictable economic sphere, a predictable social sphere), not merely clear and determinate rules generating certain and predictable outcomes. And in fact, clear and determinate rules would often produce less predictable environments than vague legal standards”).
Christie, George, Op. cit., pp. 885, 890 (“[i]t will be urged that it is precisely this vagueness in language which often permits the law to perform so many of its social functions. … The importance of the flexibility that vagueness gives to all normative methods of social control can scarcely be overestimated and is recognized by all. It allows man to exercise general control over his social development without committing himself in advance to any specific concrete course of action. Without such flexibility, man would have to choose between no regulation and the impossible task of minute specification of what is and what is not to be permitted. Moreover, if man tries to regulate too much in advance, he will be faced with the need to pervert his own language through the constant creation of vagueness in order to save himself from his own improvidence”).
Jones (1996) (“The real choice, I believe, is not between detailed rules that we have today and less detailed legislation, when detailed legislation wins on the ground of certainty; but between detailed rules and less detailed legislation interpreted in accordance with principles, where less detailed legislation wins on the ground of certainty because the use of principles provides predictability”).
See Jobs, Thorsten, Op. cit., pp. 123–124.
Frans Vanistendael very figuratively describes the specifics of legal principles: “The use of legal principles in tax law is problematic, because it is like trying to explain astrophysics through the poetic beauty of a starstudded sky rather than through a mathematical model. … Floating in the galaxy of principles are a number of very general principles and concepts, which are seldom found in written texts of positive law, but are quite common in doctrine, jurisprudence and legal tradition and which are regularly used as instruments for the interpretation of law in general, and from time to time also in tax law” (Vanistendael 2014).
The official legalization of the principles of tax law can be different: some of them can be formulated as specialized rules, others are only mentioned in the sources of tax law, others are inductively derived from the context of a number of legal norms. Such legalization can be carried out by the legislator—in the process of issuing normative legal acts, by courts—within the framework of exercising their discretionary powers, by other participants in tax relations—by forming a stable law enforcement practice and its authorization by the state (See Demin 2011a).
Joseph Raz defines this difference as follows: “Rules prescribe relatively specific acts; principles prescribe highly unspecific actions” (Raz 1972, p. 823).
Mark van Hoeck notices that a legal principle will often be worded in vague terms (van Hoecke, Mark. Op. cit., p. 160).
See Braithwaite, J., Op. cit., pp. 3–4; Jones, J. A., Op. cit., pp. 71–72.
Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 79 (“[P]rinciples may collide, for example legal certainty and legal equality may point in different directions. Colliding principles make visible which values are really at stake on a deeper level. In the case of abuse or improper use of tax rules, for example, legal certainty, conceived as a principle, may constitute an argument not to change the law, and legal equality and the ability-to-pay principle may constitute an argument to change the law. Because principles do not dictate a decision or outcome but provide an argument pointing in a certain direction, the competing principles at hand ought to be balanced”).
In resolving the disputable situation, the law-enforcing subject must choose and argue which of the principles in this case is most important; while all the conflicting principles retain their validity as acting regulators. Ronald Dworkin emphasizes this feature: “When principles intersect … one who must resolve the conflict has to take into account the relative weight of each. … Principles conflict and interact with one another, so that each principle that is relevant to a particular legal problem provides a reason arguing in favor of, but does not stipulate, a particular solution” (Dworkin 1977).
See about the vagueness and uncertainty of the concept “income”: Abreu and Greenstein (2012) (“Instead of reflecting by its own terms tax law’s defining values, it gives the IRS the flexibility to navigate the shoals of social opinion regarding income taxation, thereby both providing stability in the administration of the income tax and permitting the evolution of a concept of income that serves the important values in taxation”).
Earlier, we noted an open-ended structure of the principles of tax law, the content of which cannot be limited once and for all by the set limits. This feature is inherent in evaluative concepts, the content of which is not once and for all a given value, but constantly evolving. Ronald Dworkin points out the similarity of principles and evaluative concepts, in particular, noting that when an evaluated term is included in a rule wording, it makes the application of this rule “depend to some extent upon principles or policies lying beyond the rule, and in this way makes that rule itself more like a principle” (Dworkin, Ronald, Op. cit., p. 28).
Tax literature on GAAR is very extensive and multifaceted; See, e.g., Chand (2018); GAARs—A Key Element of Tax Systems in the Post-BEPS World. Michael Lang (ed.); Amsterdam—IBFD, 2016, 840p.; Rosenblatt (2014); Bank (2017); Feria (2017); Broe and Beckers (2017); Bykov and Frotscher (2016) and many others.
Gribnau, Hans, Legal Certainty: A Matter of Principle, p. 88 (“Sometimes the legislator even deliberately formulates rules too broadly to put off taxpayers (chilling effect). Some anti-avoidance provisions to prevent tax evasion or abuse or undesirable use of tax legislation are a case in point. The result is uncertainty for taxpayers, leaving the courts large latitude to determine the application of the law”).
Sometimes tax literature and court decisions contain terms “substance of the law”, “intent of the law”, “the thing which the statute intended” and similar to them.
Ilyin (1993, p. 255). See also Logue (2005). Tax Law Uncertainty and the Role of Tax Insurance, p. 374 (“[G]iven the existing incentives to under comply with the tax laws, maybe the deterrence value of a little legal uncertainty will at least help to even things out. Indeed, the only thing preventing some taxpayers from being more aggressive in their tax planning may be the residual level of uncertainty within the tax laws. And this might even be Congress’s intenth lawmakers may have left some uncertainties in the tax laws with the hope in mind that taxpayers, seeking to avoid uncertainty, would err on the side of caution”).
See Givati, Y., Op. cit., p. 146 (it is noted that the reliance on general anti-avoidance doctrines, such as the economic substance doctrine, also introduces significant uncertainty to tax law).
See Lawsky, Sarah B., Probably? Understanding Tax Law’s Uncertainty, p. 1032 (“A transaction may adhere to every element laid out in the tax code but still violate the law”).
Blank, J. D., Staudt, N. C., Op. cit., pp. 1647–49 (“While the latest forms of abusive corporate tax strategies are certainly more sophisticated than their predecessors, their basic objective—avoidance of corporate tax liability through an application of tax law that Congress never envisioned—remains the same. … The mass marketing of these strategies by major accounting firms and other tax advisors in the late 1990s and early 2000s led to a corporate tax abuses, boom that commentators described in terms of these as an ‘epidemic’, a ‘crisis’, and a ‘beast’ that must be ‘slayed’”).
See Walpole and Evans (2011).
Blank, J. D., Staudt, N. C., Op. cit., pp. 1655–56 (It is noted that judicial outcomes over the past decade support the view that corporate tax abuse is an uncertain area of the law; judges may unevenly apply the judicial anti-abuse standards when determining whether or not a tax strategy represents tax abuse).
It is important to distinguish between “silence of the law” and the gaps in the law; see Langenbucher (1998).
In legal science, the problematics of discretion is actively studied primarily in the context of judicial discretion and in the conditions of the total domination of sociological and logical-semantic law schools and traditions. The main discussion takes place not about admissibility of discretion per se in administrative practices—it actually is not challenged by modern experts, but around the limits and the scope (range) of the discretionary power. Specific approaches and definitions depend on the concept of law of specific authors. The most famous researcher of a discretion is Kenneth Culp Davis according to whom official “has discretion whenever the effective limits on his power leave him free to make a choice among possible courses of action or inaction” (See Davis 1976). For Israeli scientist Aharon Barak, discretion is “the powers given to the person who shall be entitled to the power to choose between two or more alternatives, when each of alternatives is legitimate” (Barak 1989). As Harold Pepinsky considers the discretion derives from accountability: “Accountability means having to answer for one’s actions (or inaction). Accountability is thus synonymous with responsibility. Having to answer for one’s actions makes sense only if one could have chosen to do otherwise”. Eventually, he comes to the conclusion that “discretion amounts purely and simply to variance in decisions an observer is unable to explain” (Pepinsky 1984).
See Dorado (2011, p. 30).
See Pagone, Gaetano, Op. cit., pp. 899–900 (“There are many reasons for discretions to be given in tax legislation notwithstanding the desirability of clarity, certainty and predictability One of them may be to have a tax outcome depend upon commercial, business or economic considerations that non-discretionary rules might not allow. … Another reason for discretions is that they are a response to what may be thought to be the ‘social evil’ of tax avoidance”).
As pointed out by Edward Morse, some discretion is unavoidable because of linguistic indeterminacy of the legislation: “Some forms of discretion … will remain a problem as long as human beings interpret language differently”. In addition, he argues that discretion also arises from the practical impossibility of drafting rules to speak directly to every situation governed by law; in the areas of legal uncertainty discretion allows to fill in “gaps” between the rules (Morse 1999).
Pagone, Gaetano, Op. cit., p. 907.
Analyzing the new forms of tax administration, Judith Freedman emphasizes: “An adherence to the rule of law does not mean that we must stick to the old cat-and-mouse game of detailed legislation, which often provides opportunities for taxpayers and their advisers to find ways of subverting that very legislation—the game of “creative compliance”. The answer does not lie in rigid detailed legislation, literally interpreted; indeed, this is not the way most modern legal systems work, even in the tax area. It may be essential to leave some discretion in the hands of the tax authorities and the courts, but this must be bounded discretion” (Freedman 2012).
See Ahmad and Stern (1991) (“The term presumptive taxation covers a number of procedures under which the ‘desired’ base for taxation (direct or indirect) is not itself measured but is inferred from some simple indicators which are more easily measured than the base itself”).
See Logue and Vettori (2011); Thomas (2013); Thuronyi (1998); Bird and Wallace (2005).
Thomas, K. D., Op. cit., p. 119 (“Under a true presumptive regime, the tax base is measured indirectly based on some readily observable characteristics of the taxpayer or the taxpayer’s business”).
Thuronyi, Victor, Op. cit., p. 401. (“The term ‘presumptive’ is used to indicate that there is a legal presumption that the taxpayer’s income is no less than the amount resulting from application of the indirect method. As discussed below, this presumption may or may not be rebuttable. The concept covers a wide variety of alternative means of determining the tax base, ranging from methods of reconstructing income based on administrative practice, which can be rebutted by the taxpayer, to true minimum taxes with tax bases specified in legislation”).
See Taube and Tadesse (1996).
See Logue, K. D. and Vettori, G.G., Op. cit., pp. 103–4 (“A presumptive tax imposes a levy on one thing as a proxy for (or rough approximation of) another thing. … Every tax system, of course, trades off accuracy for simplicity to some degree. And how much of a sacrifice in accuracy is required depends on the context. The term presumptive tax has traditionally been used to describe tax regimes in environments in which administrative/enforcement costs are unusually high and therefore accuracy of income measurement is unusually expensive. Such environments are often found in developing countries, where it is necessary to make unusually large sacrifices in income-measurement accuracy in order to be able to collect any taxes at all”).
See Pagone, Gaetano, Op. cit., p. 906 (“Some uncertainty may be inevitable, but some is not. Certainty and uncertainty each come at a cost to the community, and our focus should be on what we gain and what we lose when we enact laws with deliberate uncertainties. We should look hard at who gains, and how much may be lost, from the uncertainty of the application of taxing laws and seriously question in whose interest uncertainty can be maintained”).
Cf.: The Tax Ordinance Act of the Republic of Poland (Art. 2a) according to which “doubts about the content of the tax legislation, which cannot be eliminated shall be interpreted in favour of the taxpayer”.
Decision of the Constitutional Court of Russia of 01.03.2010 NO. 430-O-O. Bulletin of the Constitutional Court.2010. NO 4.
Cf.: See Vasconcellos, R.P., Op. cit., pp. 16, 33 (“Because the private property of individuals can be at stake when taxes are not paid or are paid less than what is due, it seems fair that, in case of doubt, the taxpayer should be considered exempted from payment. … If the obligation to pay tax is not made clear in the statute, the sanctions would represent a punishment on someone’s intention”.
Cf.: United States v. Merriam, 263 U.S. 179, 188 (1923) (“[i]f the words [of a statute] are doubtful, the doubt must be resolved against the government and in favor of the taxpayer”).
See Juchniewicz and Stwoł (2017, p. 309) (“Application of the principle in dubio pro tributario in the interpretation of the tax law is to ensure implementation of the principle of certainty in tax legislation. This principle should perform the function of clarifying and simplifying legislation, which is important from the point of view of the general state of [t]ax law. This particularly applies to the situation when the position of regulation lead to conclusions that do not make sense, contradictory or ambiguous, then the best solution is a choice of interpretation of legal norms, which will be beneficial to the taxpayer”).
See Vasconcellos, R.P., Op. cit., p. 17 (“The real problem lies in determining whether the law (legislation and relevant precedents) is uncertain or not at some point”).
Decision of the Constitutional Court of Russia of 28.03.2000 NO 5-P. Bulletin of the Constitutional Court. 2000. NO 4.
Decision of the Constitutional Court of Russia of 13.03.2008 NO 5-P. Bulletin of the Constitutional Court. 2008. No 3.
For example, the contradiction of rules contained in sources of law of different legal force is easily removed by applying the lex superior derogat legi inferiori principle, known since the Roman law. The collision between the general and special norms is resolved on the basis of the principle lex specialis derogat generali. If there is a contradiction between the norm contained in the Tax Code and the norms of other (uncodified) tax laws, the priority of the codified act is valid. In addition, Russian tax law has a rule that “Institutions, concepts and terms contained in civil, family and other areas of legislation of the Russian Federation which are used in Tax Code shall have the same meaning as they have in those areas of legislation, unless otherwise stipulated by Tax Code” (Art. 11, para. 1 of the Tax Code of the Russian Federation).
This axiom relates to the sphere of taxation (subjects and elements of taxation), as well as the qualification of an act as a tax offense and the establishment of tax sanctions. See Langenbucher, K.C., Argument by Analogy in European Law. Cambridge Law Journal, Vol. 57, No. 3, 1998, p. 486 (“… no revenue authority may impose taxes not explicitly permitted by the law and no judge may sanction taxation outside the scope of a statute. Where only the legislature may legitimately act, the judiciary may not extend its powers by means of an analogy”).
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Demin, A.V. Certainty and Uncertainty in Tax Law: Do Opposites Attract? Laws 2020, 9, 30. https://doi.org/10.3390/laws9040030
Demin AV. Certainty and Uncertainty in Tax Law: Do Opposites Attract? Laws. 2020; 9(4):30. https://doi.org/10.3390/laws9040030Chicago/Turabian Style
Demin, Alexander V. 2020. "Certainty and Uncertainty in Tax Law: Do Opposites Attract?" Laws 9, no. 4: 30. https://doi.org/10.3390/laws9040030