ABSTRACT
Loosely, “tax avoidance” involves minimising taxes by means that are within the letter of the law but that are thought to be contrary to the law’s intention. Examples include diverting income to lower-taxed individuals or employing artificial structures or transactions to contrive deductible losses. Authorities cannot predict all possible kinds of avoidance. Some legislatures therefore pass “general anti-avoidance rules”, or “GAARs”, to frustrate the practice. Some GAARs make tax-avoiding arrangements void against the tax authorities; some empower authorities notionally to restructure arrangements into more realistic forms and to tax the restructured form; some do both. GAARS come in many forms, for instance: broad-brush or detailed; targeting “fictional” arrangements or arrangements that have the purpose of tax avoidance, or arrangements that depart from economic reality. But behavioural public finance has a limited role to play in predicting the form of GAAR that is most suitable for a particular jurisdiction or that the jurisdiction is likely to adopt.
