Economic Substance Doctrine: Time for a Legislative Response
Bibliographic record
Abstract
As a general rule, an effective strategy for combating tax avoidance within an income tax system is to require that market transactions have an economic substance. The administration of this principle, however, has given rise to constitutional and institutional dilemmas in the U.S., the U.K., and Canada. During the 20th century, judges in these countries have sought to intervene (to various degrees and at different stages) in the battle against tax avoidance by contributing to the application and development of the economic substance doctrine, but this judicial activism has created concerns about the intervention of the judiciary in deciding what types of transactions should require economic substance - a role that institutionally belongs to the legislature. In this article, we identify an important shift in judicial attitude during the early part of the 21st century in Canada, the U.K., and the U.S., and the implications of this shift to future reforms in this area. We note that when the government fails to state its policy objectives, the judiciaries in these jurisdictions demonstrate reluctance and/or difficulty in filling in the gaps by making decisions about when transactions should require economic substance, and instead are leaving it to the legislatures to indicate when and if this requirement applies. The implication of this observation vis-¿-vis new and emerging judicial attitudes is significant given that it puts new pressures on the legislature: If the legislature is no longer able to rely on the courts to make these decisions to effectively administer the doctrine, the legislature will have to require the doctrine by statute. That is, the legislature will have to transform the doctrine into a generally applicable anti-avoidance rule and express it in a clear and unambiguous manner.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.004 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.001 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".