The recent discussion here of a situation involving "substance over form" and "step transaction doctrine" concerned a well-established rule of tax law: If something is done only for tax avoidance, it can be disregarded by IRS.
In Australia, they put that in a statute when they enacted a new GST code in 1999. Lately a part of that law, taken out of context, is again making the e-mail rounds. For those who are interested, here is the rest of the story.
The law in question starts out with this plain-language explanation:
>>>>165-1 What this Division is about
The object of this Division is to deter schemes to give entities benefits by reducing GST, increasing refunds or altering the timing of payment of GST or refunds.
If the dominant purpose or principal effect of a scheme is to give an entity such a benefit, the Commissioner may negate the benefit an entity gets from the scheme by declaring how much GST or refund would have been payable, and when it would have been payable, apart from the scheme.
This Division is aimed at artificial or contrived schemes. It is not, for example, intended to apply to:
(a list of examples) <<<<
Then it goes on to say (and this is the language that, taken out of context, seems ridiculous):
>>>>165-55 Commissioner may disregard scheme in making declarations
For the purposes of making a declaration under this Subdivision, the Commissioner may:
(a) treat a particular event that actually happened as not having happened; and
(b) treat a particular event that did not actually happen as having happened and, if appropriate, treat the event as:
(i) having happened at a particular time; and
(ii) having involved particular action by a particular entity; and
(c) treat a particular event that actually happened as:
(i) having happened at a time different from the time it actually happened; or
(ii) having involved particular action by a particular entity (whether or not the event actually involved any action by that entity).<<<<
In Australia, they put that in a statute when they enacted a new GST code in 1999. Lately a part of that law, taken out of context, is again making the e-mail rounds. For those who are interested, here is the rest of the story.
The law in question starts out with this plain-language explanation:
>>>>165-1 What this Division is about
The object of this Division is to deter schemes to give entities benefits by reducing GST, increasing refunds or altering the timing of payment of GST or refunds.
If the dominant purpose or principal effect of a scheme is to give an entity such a benefit, the Commissioner may negate the benefit an entity gets from the scheme by declaring how much GST or refund would have been payable, and when it would have been payable, apart from the scheme.
This Division is aimed at artificial or contrived schemes. It is not, for example, intended to apply to:
(a list of examples) <<<<
Then it goes on to say (and this is the language that, taken out of context, seems ridiculous):
>>>>165-55 Commissioner may disregard scheme in making declarations
For the purposes of making a declaration under this Subdivision, the Commissioner may:
(a) treat a particular event that actually happened as not having happened; and
(b) treat a particular event that did not actually happen as having happened and, if appropriate, treat the event as:
(i) having happened at a particular time; and
(ii) having involved particular action by a particular entity; and
(c) treat a particular event that actually happened as:
(i) having happened at a time different from the time it actually happened; or
(ii) having involved particular action by a particular entity (whether or not the event actually involved any action by that entity).<<<<
Comment