Ectopia, Formalism, and Anti-Avoidance Rules in Income Tax Law

Governments attack tax avoidance in a number of ways. Statutory anti-avoidance rules are one means. Such rules come in two forms: specific and general. General rules potentially apply to any kind of transaction that may result in tax avoidance. Section 99 of the New Zealand income Tax Act 1976 is a typical example of a general rule. Similar rules are included in the tax legislation of Australia, Canada, Hong Kong, Malaysia, and Singapore. The United States and the United Kingdom are two notable exceptions. Fundamental flaws in the concept of income, such as the artificial concepts of space, time, and the capital/revenue distinction, contribute to an ectopia in tax law. “Ectopia” refers to a characteristic that distinguishes tax law from most other areas of law: the fact that tax law is in a sense detached and dislocated from its subject matter. Not surprisingly, the greatest opportunities for tax avoidance occur where the ectopia of tax law is most apparent. In response, large parts of the income tax legislation are given over to specific rules that are calculated to frustrate avoidance