Certainty is traditionally considered one of the fundamental criteria of a good tax system. Uncertainty in tax outcomes will hinder economic activity and increase compliance costs. The Australian experience shows that certainty can be a casualty of a General Anti-Avoidance Rule (GAAR).
Australia has long had a GAAR there having been one in the income tax legislation of 1915 and 1936. The 1936 rule proved by the late 1970s ineffective to prevent a growing industry of tax avoidance as a consequence of a gradual limitation of its scope by the High Court (Australia’s highest level court). In 1981 the current GAAR was introduced to overcome those difficulties and the trend of the High Court so far although only a small number of cases has reached that level seems to be to give this GAAR as broad an application as possible.
The...
