This morning, Tax Justice Network released the results of research designed to discover how much tax legislation is devoted to anti-avoidance measures. The research says 41% – a pretty big number. The researchers conclude:
The tax avoidance industry and tax advisers in general are constantly complaining about the volume of legislation they have to contend with. However, this research shows that they and their clients have to take a lot of the responsibility themselves.
I was taken aback. That conclusion cannot be made from the analysis presented. This is why:
- There is no analysis of what constitutes ‘tax avoidance.’ This would be difficult because there is no generally accepted or legal definition of the term. It follows that anti-avoidance cannot be defined. That is not to say there are no definitions of tax avoidance. There are plenty. But none have been presented for the purpose of this conclusion.
- The conclusion is in fact half a hypothesis. In its current form, the research conclusions represent little more than a leap of faith (because the researchers believe in the veracity of their case) or gut instinct. The generally accepted scientific approach is to develop a hypothesis and then test it empirically. I’m a bit ring rusty on developing hypotheses but one might read: ‘Anti-avoidance legislation exists because taxpayers and their advisors abuse the law.’ (Hence the amount of anti-avoidance law.) That could then be tested against a detailed analysis of the initial facts disclosed by this research. That has not been done.
While I congratulate applaud TJN and am pleased to see a stake in the ground, this is only a starting point. Assuming for one moment that the broad conclusion is shown to be correct, then it should also reveal a series of broad causal factors that contribute to abuse. This can be deduced from a literature search. I would go further.
It is possible to hypothesise that much of recent tax legislation has been devoted to anti-avoidance. That allows researchers to bite this off into bite-sized chunks and provide us with a historical perspective. This is important because it will be necessary to provide context to the discussion. Law is located in time, space and societal norms.
Overall, that would be useful research. Why?
- It provides the basis for informed debate
- It enables a critical analysis of how the law has evolved based on identifiable reasons forwarded at different points in time
- It allows other interested parties and academics who are trained in scientific research to test, modify, refine, oppose or concur over a matter that is of huge interest to all of us. Especially the 200,000 plus accountants who have a direct vested interest in this issue. This is a requirement of all serious research.
- It shifts the debate to matters of substance rather than having them mired in conjecture.
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