Path: utzoo!attcan!lsuc!dave From: dave@lsuc.on.ca (David Sherman) Newsgroups: can.general Subject: Re: TAX REVOLT NOW!! Summary: general anti-avoidance rule Keywords: GAR Message-ID: <1989Aug20.064223.26979@lsuc.on.ca> Date: 20 Aug 89 10:42:21 GMT References: <117@isgtec.UUCP> Reply-To: dave@lsuc.UUCP (David Sherman) Distribution: can Organization: Law Society of Upper Canada, Toronto Lines: 48 In article <117@isgtec.UUCP> robert@isgtec.UUCP (Robert Osborne) writes: >Hi Kim! >>How about looking for tax shelters? That's a more direct solution. >>No amount of bitching is going to change the government's greed. > >I'm not sure if this is what you meant by "tax shelter", but the >most recent tax act contains a rule called GAR (General Anti-Avoidance Rule) >which makes it illegal to seek out and take advantage of loop-holes in >the tax act. (I'm not exactly sure of how this works, maybe David Sherman >could say something on this). Sort of a law ordering adherance to >"spirit of the law" as opposed to "letter of the law". > >This is great, now "ignorance of the law AND of the law as the Tax Department >interprets it" is not a legal defence. Imagine the implications if >this rule was extended to all laws, not just the TAX act. It's known as GAAR, actually. Yes, it's a general anti-avoidance rule, section 245 of the Income Tax Act, in force since September 13, 1988. It doesn't make it "illegal to take advantage of loop-holes", as such (certainly not in the sense of criminal or quasi-criminal penalties). It provides, in effect, that where you misuse a provision of the Act or abuse the Act in order to obtain a "tax benefit", a court can make whatever order is necessary to negate the effect of what you've done -- that is, for income tax purposes, ignore the deduction or credit you've claimed, allocate "your" income to some other taxpayer, or whatever. The steps the court take are very broad, but you have to get over the "misuse or abuse" hurdle to fall into GAAR. For a comprehensive, well-written article on GAAR and its history, see Brian Arnold and James Wilson, "The General Anti-Avoidance Rule", 36(4), 36(5), 36(6) Canadian Tax Journal 829-887, 1123-1185, 1369-1410 (1988). It's the lead article in the last 3 issues of the Journal for 1988. Incidentally, effective September 1, 1989 there is also a requirement for all tax shelter "promoters" to register with Revenue Canada and provide you with an identification number before you invest. Otherwise you cannot claim the benefits of the shelter. A tax shelter is defined, very roughly, as an investment which you can full write off within 4 years. David Sherman -- Moderator, mail.yiddish { uunet!attcan att utzoo }!lsuc!dave dave@lsuc.on.ca