Sources Of Revenue Law Topic 2 - Revenue Law

SOURCES OF REVENUE LAW/ RULES OF INTERPRETATION (TOPIC 2).

- Tax Evasion: Simply where you don’t bother paying tax = IILEGAL.

- Tax Avoidance: This is entirely LEGAL and you can’t get into legal difficulty. It is the action of structuring business affairs to reduce or eliminate tax bills, basically finding the loopholes that are there. It is however, morally wrong to engage in tax avoidance but not illegal.

- Tax Laws are heavily based in the Legislation, Article 22 of the Irish Constitution states that the legislator (Oireachtas) is the only power which can sign off on taxes.

-Taxes Consolidation Act 1997 ( Main Legislation)

- Annual Finance Acts.

- Capital Acquisitions Tax Consolidation Act 2003.

- Stamp Duty Consolidation Act 1999.

- VAT Consolidation Act 2010.

- When it comes to a piece of legislation then the interpretation of its provisions is of the utmost importance.

- Overall rule is that the words are to be given their ordinary meaning; Inspector of Taxes v. Kiernan [1981]: This case involved the meaning of cattle whether it also included pigs. Going back to the ordinary meaning pigs had not been included. If the Act is directed towards some type of specialist activity then it can be given its specialised meaning and not expanded beyond that.

STATUTORY INTERPRETATION.

CANONS OF CONSTRUCTION:

- The Literal Rule: Kiernan case, literal reading of the word to be adhered to regardless of how absurd the result may be.

- The Golden Rule: This rule becomes applicable where the literal reading produces an absurd result, then the reading under this rule will prevent somewhat the absurdity but is inconsistent with the Statute.

- The Mischief Rule (Purposive Approach): Here a determination will be made as to the intention of the Statute as a whole and the particular provision is distinguished from the overall intention of the Statute. This approach is quite inconsistent as different people will create their own subjective idea as to the intention of a provision and on foot of this inconsistency this rule is seldomly used.

-Historically, there was always a stringent literal approach taken of the provisions and this was beneficial to tax avoidance.

- Cape Brandy Syndicate v. IRC: Rowlatt J reasserts the fact that when it comes to tax you only look to what was said, nothing is to be read into or implied.

- Partington v. AG: Here it was noted that if someone can’t be brought within the words of a definition in the Statute then someone might not have to pay a particular tax on foot of the literal approach.

- In this case, the ambiguity in the provision found it to be infavor of the tax payer to which they continue to avoid the tax.

- IRC v. Duke of Westminister [1936]; {Major high point).

• The Duke decided that he was paying too much tax and wanted to avoid it; he wasn’t receiving a tax break for his employees tax, but if he paid an annuity to his staff instead of a wage he could reduce his tax bill significantly. Essentially, it was a free gift of money on an annual basis, you wouldn’t need to work or serve for this gift of annuity.

• In this case it was said that you have a entitlement to organise affairs to minimise tax bills if you can. A literal approach was taken and the Duke was allowed to avoid tax. In saying this on a purposive approach this annuity wouldn’t have been allowed and today it wouldn’t hold either.

• This approach was followed in Ireland in the case of O’Sullivan v. P Ltd.

- Following the Duke of Westminister case things began to get out of control and a tax avoidance industry was on the...