Tax policy v. Tax legislation & Rule of Law

Tax policy archery

“The legislature may have a target, but the legislation must hit it.”
– Giles JA in Trust Company Ltd v. Chief Commissioner of State Revenue [2007] NSWCA 255 at [84].

Or, to put it another way, “It is not for judges to shoulder the law-making responsibilities of Parliament”: Commissioners for HM Revenue & Customs v. Mayes [2011] EWCA Civ. 407. This is despite such provisions as s. 14 (A) (i) of the Acts Interpretation Act 1954 (Qld). The tension between tax policy and tax words is always relevant. However, this does not mean effect should not be given to the actual words of the taxing statute: see eg Mackinnon Wallace Holdings Pty Ltd v Commissioner of State Revenue (Vic) [1999] 1 VR 397; (1998) 98 ATC 5181 in which Charles JA said at 5187: “We are constrained by the language used by Parliament; we cannot legislate for ourselves and, however purposive the construction of s 64A(3), I cannot read the words as sufficient to impose duty on [the taxpayer] as the Commissioner now claims.” It is not to the point that an amendment to tax legislation may be “beneficial” to taxpayers.

So what, one may ask? Well, the Rule of Law abhors creeping authoritarianism. And this is evident in some of the latest amendments to the Duties Act 2001, (e.g.) the small business restructures (Part 1A) and the AFAD amendments. Even an uncertain exemption in their operation to duty on some transactions ignores the Rule of Law. A taxpayer just doesn’t know whether they will get benefit of the exemptions. Why not have a mirror exemption reflecting the ability of a taxpayer can get a binding ruling like Division 4 of Part 1 of Chapter 10? Surely it’s not too much to ask that sections imposing duty and exemptions are designed and drafted with precision. If there is some problem in doing this, then at least have a Public Ruling and then at least the taxpayer gets some limited protection under Public Ruling GEN 001.6 Public Ruling System Explanation and Status, unsatisfactory as it is. These amendments fail the Rule of Law Wheel (see March 2022 Issue of the Monthly Report for the Rule of Law Wheel) in several respects. More on that later.

The Rule of Law