Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (ASU) reviews reviews a new essay by Sas Ansari (Osgoode Hall) and Lorne Sossin (Osgoode Hall), Legitimate Expectations in Canada:  Soft Law and Tax Administration. 

How exactly do non-experts understand tax law, and what is the role of the tax administrator in disseminating information about the law to (non-expert) taxpayers?  These are two critically important questions for tax administration.  While tax lawyers pride themselves on their mastery of the complex, often highly technical language of the Internal Revenue Code, lawyers are typically the last line of defense when it comes to income tax compliance.  Most taxpayers won’t even consult an accountant for tax advice. 

Recent work has brought renewed attention to these questions. For example, Shu-Yi Oei and Diane Ring have explored how Uber and Lyft drivers navigate tax questions, and Josh Blank and Leigh Osofsky have criticized the ways IRS taxpayer publications describe tax law.  

Ansari and Sossin’s essay adds to this work by describing the role of “soft law” documents produced by the Canada Revenue Agency (CRA) and the importance of these documents in administrating a tax system based on self-compliance.  As they observe, “[c]learly worded and easy to understand representations by public authorities will, in cases of ambiguity, serve to guide an individual’s actions and decisions.”

The CRA, like the IRS, produces a variety of material for use by taxpayers and tax professionals. These CRA guidelines are not the hard law of statutes and regulations and thus not legally binding. The authors argue that the ability of soft law to change without notice “may undermine taxpayers’ perceptions of fairness.” Thus, their focus is not on the quality of the advice this soft law produces but rather the right of taxpayers to rely on it in filing their returns.  

The core of the article explores the Supreme Court of Canada’s approach to the doctrine of legitimate expectations, a common law doctrine that limits the discretion of administrative officials by considering, in part, past agency practice. While, the legitimate expectations doctrine provides only procedural and not substantive rights, the authors argue that recent developments in the doctrine may portend a change in the way courts treat CRA guidelines.  

Specifically, the Federal Court of Appeals (appellate level of review in tax cases) has refused to bind the CRA to its guidelines. The authors argue that developments in other substantive areas suggest that there may be an obligation on the part of the CRA to at least consider its own guidelines when exercising discretion in enforcing the law.

I’ll confess, I read the essay largely because I wanted to learn more about Canadian tax administration, and I wondered whether life was better with our neighbors to the North. In Canada, it seems there is also room for improvement.

The essay left me interested in learning more about Canadian administrative law. I was struck by the ways U.S. and Canadian administrative law appear to differ. For example, it seems there is no national statute, parallel to the Administrative Procedure Act, that guides the courts as they review administrative decisions. (Though, provincial statutes and organic statutes may provide similar guidance in some cases.)  

Nevertheless, there may still be common ground to find. The authors describe Canada’s Income Tax Act as “‘complex’ and ‘convoluted’” and “filled with provisions that are ambiguous and unclear.” 

Here’s the rest of this week’s SSRN Tax Roundup:

• Bradley T. Borden (Brooklyn), Bartell and the Expansion of Facilitated Exchanges, 20 Journal of Passthrough Entities 13 (2017) 
• Adam Chodorow (ASU), The Parsonage Exemption (2017)
• Allison Christians (McGill), Taxpayer Rights in the United States, "Derecho Tributario Y Derechos Humanos/Tax Law And Human Rights", César Alejandro Ruiz Jiménez, ed. (2016)
• Allison Christians (McGill), Taxpayer Rights in Canada, "Derecho Tributario Y Derechos Humanos/Tax Law And Human Rights", César Alejandro Ruiz Jiménez, ed. (2016)
• Jack Manhire (Texas A& M), Predicting Stock Market Prices with Physical Laws (2017)
• David Miller (Fordham), How Donald Trump Can Keep His Campaign Promises, Grow the Economy, Cut Tax Rates, Repatriate Offshore Earnings, Reduce Income Inequality, Keep Jobs in the United States, and Reduce the Deficit (Tax Forum Paper No. 680)
• Thomas S. Neubig (Tax Sage Network) & Joel B. Slemrod (Michigan), A Tax-Systems Perspective on Recent Global Tax Initiatives (2017)
• Chris William Sanchirico (Pennsylvania), Business Investment in the Tax Reform Blueprint (U of Penn, Inst for Law & Econ Research Paper No. 17-4)