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“Fuzzy law” in the tax world

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Published on 01 Jun 20 by "THE TAX SPECIALIST" JOURNAL ARTICLE

This article looks to recent developments with corporate law and the Banking Royal Commission and asks if there are any lessons to be learned for the formulation of tax law. In particular, should tax law be prescriptive or principles-based (ie “fuzzy’)? Four example areas of tax law are considered, being: the capital v revenue account dividing line (together with some recent cases and developments); the tax consolidation provisions; the taxation of financial arrangements provisions; and the transfer pricing provisions. Differing conclusions emerge from these areas. The answer itself is fuzzy and the article concludes that there is a role to play for both principles-based drafting and prescriptive drafting of tax law. Tax law is at its best when both the principles and goalposts are clear — achieving that holy grail is not easy.

Author profile

Christopher Kinsella CTA
Chris is a tax partner based in Sydney with the law firm Holding Redlich. Chris has over 30 years’ experience advising clients in relation to tax matters, particularly early ATO engagement, ATO access powers, tax audits, tax litigation and dispute resolution. Chris has acted for clients in banking/insurance, property/infrastructure, pharma, mining/energy, manufacturing and professional services. The Holding Redlich tax controversy team represents taxpayers (and their advisors) in tax disputes in both the Federal Court and the AAT. Focus areas include anti-avoidance, transfer pricing and international tax. Notable cases that Chris has been involved with include the Chevron transfer pricing case and the Resource Capital Fund tax cases. Recent topics receiving attention from clients also include legal professional privilege, promoter penalties and the ATO’s broader attitude to tax advisers more generally. Chris is the chair of the Tax Institute’s Dispute Resolution Committee and the chair of the Number One Tax Discussion Group. Chris is accredited in dispute resolution with the NSW Law Society. - Current at 14 December 2021
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