GAAR in Action: An Empirical Study of Transaction Types and Judicial Attributes in Australia, Canada, and New Zealand

The authors report the results of an empirical study on the general anti-avoidance rules (GAARs) in action in Australia, Canada, and New Zealand. The study builds on a conceptual framework, developed by Tim Edgar, that classifies tax-avoidance transactions as falling into three types (tax-attributes creation, tax-attributes trading, and tax-attributes substitution) and considers the transaction types in connection with the attributes of judges and with the broader context of judicial decision making. To contextualize the empirical analysis, the authors provide a doctrinal analysis of both the countries' GAAR provisions and the judicial interpretation of GAARs, along with some examples of divergence and convergence among the three countries. The statistical results provide some modest support for Edgar's claim that the judiciary's institutional competence is limited when it comes to identifying tax avoidance in substitution cases and that Canada's GAAR could be improved through the incorporation of an economic substance test.