Advance Tax Rulings in Perspective A The PDF

Advance Tax Rulings in Perspective:
A Theoretical and Comparative Analysis
BENJAMIN ALARIE, KALMEN DATT, ADRIAN SAWYER AND GREG WEEKS*
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Advance tax rulings are an increasingly common feature of mature income tax systems throughout the
world. The Organisation for Economic Co-operation and Development’s (OECD’s) work demonstrates that
there has been a trend from 1990 to 2013 among OECD member countries to adopt advance tax rulings
regimes. The international expansion of advance tax rulings seems both intuitively desirable and salutary.
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rulings regimes so popular?
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to highlight that the increased pervasiveness of advance tax rulings internationally is potentially puzzling
in the light of Givati’s analysis, which suggests that the balance of strategic considerations facing taxpayers
systematically disfavours taxpayers seeking advance tax rulings. Theory thus appears – at least as a
preliminary matter – to be out of step with the observed rulings practices tracked by the OECD. We then
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theory.
To complement the arguments from theory, we offer some tentative evidence that advance tax rulings may
not be of any consequence economically speaking. Empirical analyses of panel data of rulings practices
published by the OECD do not show any reliable correlations of observed practice with social or economic
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rulings regimes are not likely to be particularly important in practice. This can arise in part due to the
relatively slow process for issuing advance rulings compared to the timeframe facing taxpayers to make
key business decisions. From an optimistic perspective, advance tax rulings are best regarded as serving
as expressive function in support of the rule of law and sound tax administration. Less generously, a cynic
might be tempted to say that the resolution to the puzzle posed by the incongruence between theory and
practice may be that the best reason to have a binding rulings regime may be because just about everyone
else has one.
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362 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

Advance Tax Rulings in Perspective: A Theoretical and Comparative Analysis
1.0 INTRODUCTION
Advance tax rulings1 are a common feature of mature income tax systems throughout the world, including
the United States,2 the United Kingdom,3 Canada,4 Australia,5 and New Zealand.6 It is currently possible
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tax rulings.7 This article draws on a recent advance in analysis of advance rulings using the economic theory
by Givati,8DQGRQFXUUHQWSUDFWLFHVDURXQGWKHZRUOGDVWKH\KDYHGHYHORSHGIURPWRWRWDNH
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tax systems. A shared basic assumption at the outset of this study was that advance tax rulings are useful
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authority. Binding rulings are, in effect, a subset of the larger category of advance rulings. The issues that arise in relation to
whether or not rulings bind the revenue authority are considered in section 4 below.
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3 The United Kingdom introduced the Advance Agreements Unit in October 2007 to provide rulings on certain listed transactions.
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4 The Income Tax Rulings Directorate of the Canada Revenue Agency provides advance income tax rulings. For more information, see
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5 See Tom Sherman Report of an Internal Review of the Systems and Procedures Relating to Private Binding Rulings and Advance
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6 See John Prebble Advance Rulings on Tax Liability9LFWRULD8QLYHUVLW\3UHVVIRUWKH,QVWLWXWHRI3ROLF\6WXGLHV:HOOLQJWRQ
,DQ&.XSHUXVDQG-RKQ3UHEEOH³1HZ=HDODQG´LQAdvance Rulings&DKLHUVGHGURLW¿VFDOLQWHUQDWLRQDOYROE.OXZHU
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7 )RUWKH¿JXUHVVHH2(&'Taxpayers’ Rights and Obligations: A Survey of the Legal Situation in OECD Countries3DULV
DW)RUWKHPRVWUHFHQW¿JXUHVVHH2(&'Tax Administration 2013: Comparative Information on OECD and Other
Advanced and Emerging Economies3DULVDW6HHDOVR3KLOLSSD&DQQRQ³$GYDQFH5XOLQJV5LVNRU5LJLGLW\"´
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December 2014 363

Alarie, Datt, Sawyer and Weeks
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we did not set out to discover and attempt to resolve a deeper puzzle. However, that is essentially how this
article has developed.
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that the increased pervasiveness of advance tax rulings internationally is indeed quite puzzling in light of
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economic theory and practice extends to the discourse of tax administrators.
We then consider how to resolve the puzzle of why an intuitively attractive and increasingly widespread
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pervasiveness of advance tax rulings regimes should notEHHQWLUHO\VXUSULVLQJGHVSLWHWKHDSSDUHQWFRQÀLFW
with economic theory. First, even though as a matter of theory it appears that advance tax rulings ought not
to be particularly attractive to taxpayers, it is relatively straightforward to understand the strategic appeal to
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provide invitations to taxpayers to secure advance tax rulings, of which taxpayers should be understandably
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circumstances, where is the pressure for the increasingly prevalent adoption of advance tax rulings regimes
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We outline some of the possible reasons for the expansion of rulings regimes in section 5. In our view,
there are at least four reasons for governments to want to offer advance tax rulings despite their apparently
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generally, even if many of the most active and sophisticated taxpayers are reluctant to use the rulings
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A second reason for governments to offer advance tax rulings is that countries may be responding to
subtle peer pressure to come into line with international best practice in tax administration. As mentioned
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throwing a spotlight on jurisdictions that are not offering advance tax rulings and suggesting that rulings
regimes are the best practice could encourage tax administrations to adopt advance tax rulings regimes. It is
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has encouraged jurisdictions to adopt advance tax rulings regimes.
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endeavour.
Finally, it would clearly send an unattractive signal to taxpayers to discontinue an advance rulings regime
that has been put into place, even if it is not widely used. Thus, even if tax administrations expected rulings
regimes to be heavily used and are subsequently underwhelmed by the response by taxpayers, they might
well be reluctant to disband the programme.
Empirical analyses of panel data of rulings practices published by the OECD do not show any reliable
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sophisticated taxpayers in practice. From an optimistic perspective, rulings regimes are perhaps best
regarded as serving as expressive function in support of the rule of law and sound tax administration. They
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Of course, it is possible to frame matters more pessimistically. For example, a cynic might be tempted
to argue that resolution to the puzzle posed by the incongruence between theory and practice may be that
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taxpayers, who might be expected to anticipate this shading in favour of the tax administration.
2.0 THE CONVENTIONAL LAW AND POLICY APPROACH TO ADVANCE TAX

RULINGS
2.1 The Rule of Law and Tax Law Uncertainty

In contrast with the voluminous literature outlining the ways in which tax rulings regimes are designed
and the procedures thereunder operate, the theoretical academic literature on advance tax rulings is not
extensive. There have nevertheless been a number of theoretical contributions recently that attempt to
account for various aspects of advance tax rulings, and scholars have attempted to isolate the conditions
under which advance tax rulings may be desirable from the perspective of both taxpayers and governments.
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Legal and policy studies that provide summaries of the substantive rules surrounding advance tax
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10 See Carlo Romano Advance Tax Rulings and Principles of Law: Towards a European Tax Rulings System,%)'3XEOLFDWLRQV%9
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11 See, for example, Diller and Vollert, above n 8. See also Diller and others, above n 8.
December 2014 365

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We begin here with the conventional approach to tax law uncertainty being approached and resolved from
the perspective of the rule of law.
The legal and policy literature relating to advance tax rulings describes in varying amounts of detail the
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Other contributions are more recent and describe ongoing developments with respect to advance tax rulings.
Adrian Sawyer has been a frequent writer on advance tax rulings from the Australian and New Zealand
perspectives.15 Decades ago, Norman Sugarman wrote extensively during his career about the United States
federal rulings procedure.16'DQLHO6DQGOHUDQG(SKUDLP)XNVIRUDQXPEHURI\HDUVHGLWHGDORRVHOHDI
service entitled International Guide to Tax Rulings.17 The upshot of each of these studies was such that they
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on providing helpful guides to local developments and changes in the law, with a view to facilitating the
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have been less intent on evaluating the various advance rulings systems as against the theoretical literature
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is complex. Chan19 argues that rulings are really a form of dialogue between taxpayers and the revenue
authorities.207KHEDVLFFRQFHSWXQGHUO\LQJDGYDQFHWD[UXOLQJV\VWHPVLVWKDWWD[SD\HUVDUHHQWLWOHGWRNQRZ
how to calculate their liability for tax before or at the time of entering into a transaction rather than learning
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Adrian Sawyer An International Comparison of Binding Rulings Regimes, A Report for the Adjudication and Rulings Division of
the Inland Revenue Department
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17 6HH6DQGOHUDQG)XNVDERYHQ
18 An exception is Sawyer An International Comparison of Binding Rulings Regimes, above n 15.
19 :LQQLH&KDQ³7KH5LJKWWR.QRZLQ7D[/DZ´.LQJ¶V&ROOHJH/DZ-RXUQDO
20 $OLD 'XWD ³7KH +DUPRQL]DWLRQ RI $GYDQFH 7D[ 5XOLQJV 6\VWHPV LQ (XURSHDQ 8QLRQ 0HPEHU 6WDWHV ± :K\"´
)LQDQFH±&KDOOHQJHVRIWKH)XWXUHZZZ¿QDQFHMRXUQDOUR!KDVDVLPLODUYLHZRQWKHLVVXHRIGLDORJXHEHWZHHQWD[SD\HUV
and the revue authority.

WKHWD[RXWFRPHRQO\DIWHUWKHWUDQVDFWLRQLVFRPSOHWH7KLVUHÀHFWVWKHEDVLFWHQHWRI$GDP6PLWK¶V3ULQFLSOH
of Certainty.21 From this perspective, advance tax rulings are an important practical example of the rule of
ODZEHLQJDSSOLHGLQDWD[VHWWLQJZKHUHWKHJHQHUDOLVPDGHRIJUHDWHUDSSOLFDWLRQWRDVSHFL¿FVLWXDWLRQ22
,QNHHSLQJZLWKWKHFRQYHQWLRQDOYLHZRIDGYDQFHWD[UXOLQJV6DZ\HUDUJXHVWKDWWKHSULQFLSDOUHDVRQVIRU
introducing a binding rulings system in New Zealand included a desire to provide taxpayers with certainty,
ERWKEHIRUHWKHIDFWWRJLYHWD[SD\HUVWKHSRZHUWREHDEOHWRNQRZex ante the tax treatment of particular
WUDQVDFWLRQVDQGDIWHUWKHIDFWWRJLYHWKHPUHDVVXUDQFHWKDWex post they will not have a greater tax liability
WKDQWKDWGHVFULEHGLQWKHUXOLQJSURYLGHGWKH\FDPHZLWKLQWKHWHUPVRIWKHUXOLQJ23
Even setting aside the more targeted discussion of the attractiveness of advance tax rulings regimes
HFRQRPLFDOO\GLVFXVVHGEHORZLQVHFWLRQVDQGWKHFRQYHQWLRQDOYLHZWKDWSURPRWLQJWD[SD\HUFHUWDLQW\
is desirable has not gone uncontested. Some American academic commentators, including Scotchmer and
Slemrod,24 and Logue,25 have argued that fostering uncertainty on the part of taxpayers may be advantageous
to the revenue authorities in that it will potentially serve to increase taxpayer compliance. The economic
LQWXLWLRQEHKLQGWKHVHDUJXPHQWVLVWKDWULVNDYHUVHWD[SD\HUVZLOOHUURQWKHVLGHRIFDXWLRQDQGSHUKDSV
RYHUFRPSO\ZLWKVWUDWHJLFDOO\XQFHUWDLQWD[ODZ7KHSROLF\SURSRVDOQDWXUDOO\DVVRFLDWHGZLWKWKLVYLHZ
is that it might be better to withhold clear guidance from taxpayers in the expectation that they may then
pay more tax than the law actually requires. This of course runs precisely counter to the conventional law
DQGSROLF\YLHZWKDWWD[SD\HUVDUHHQWLWOHGWRNQRZLQDGYDQFHWKHOHJDO±LQFOXGLQJWD[±FRQVHTXHQFHV
associated with their actions.
In defending the conventional approach against the unconventional view advanced by Slemrod and
6FRWFKPHURQWKHRQHKDQGDQG/RJXHRQWKHRWKHUDJDLQVWSURPRWLQJFHUWDLQW\LQWKHWD[ODZ/HLJK2VRIVN\
counters that increasing the uncertainty of tax law will lead to perverse compliance consequences and that
compliance is apt to be higher without having the tax authorities resorting to “strategic tax law uncertainty”.26
3DUHQWKHWLFDOO\RIFRXUVHLWZRXOGEHFRQYHQLHQWLIXQFHUWDLQW\ZDVEHQH¿FLDOIRUWD[FRPSOLDQFHJLYHQ
WKHZHOONQRZQSUDFWLFDOGLI¿FXOWLHVDVVRFLDWHGZLWKPDNLQJWD[ODZFOHDU+RZHYHUZHDUHRIWKHYLHZ
WKDW IURP D V\VWHPGHVLJQ SHUVSHFWLYH HYHQ LI VWUDWHJLF WD[ ODZ XQFHUWDLQW\ ZHUH RI SRWHQWLDO EHQH¿W WR
SROLF\PDNHUVLQSDUWLFXODUFLUFXPVWDQFHVWKHFRQYHQWLRQDOYLHZ±DQG2VRIVN\±KDVWKHVWURQJHUVLGHRI
the argument.
Of course, in the absence of an advance ruling regime, assuring taxpayers of the tax treatment of
WUDQVDFWLRQVWKURXJKFOHDUO\GUDIWHGOHJLVODWLRQXSIURQWLVRIWHQGLI¿FXOWGXHWRWKHFRPSOH[LW\RIWKHODZ
and the complicated factual basis of commercial transactions. We will discuss in more detail below the
impact of uncertainty on the theoretical analyses of taxpayer and government actions. The point for now is
that the conventional view in the legal and policy studies is that uncertainty is undesirable from a rule of
21 Adam Smith An Inquiry into the Nature and Causes of the Wealth of NationsHOHFWURQLFYHUVLRQ
22 A recent edited volume on tax and the rule of law addresses these issues from various perspectives. See Chris Evans,
-XGLWK)UHHGPDQDQG5LFKDUG.UHYHUHGVThe Delicate Balance: Tax, Discretion and the Rule of Law,%)'$PVWHUGDP
23 6HHDOVR*LYDWL³5HVROYLQJ/HJDO8QFHUWDLQW\7KH8QIXO¿OOHG3URPLVHRI$GYDQFH7D[5XOLQJV´DERYHQDW
24 6X]DQQH6FRWFKPHUDQG-RHO6OHPURG³5DQGRPQHVVLQ7D[(QIRUFHPHQW´-RXUQDORI3XEOLF(FRQRPLFV
25 .\OH'/RJXH³2SWLPDO7D[&RPSOLDQFHDQG3HQDOWLHV:KHQWKH/DZ,V8QFHUWDLQ´9D7D[5HY
26 2VRIVN\ ³7KH &DVH DJDLQVW 6WUDWHJLF 7D[ /DZ 8QFHUWDLQW\´ DERYH Q DW ³, DUJXH WKDW WKLV PRYH PD\ KDYH SHUYHUVH
effects on taxpayer reporting and may lower, rather than raise, revenue. This argument relies on fundamental features of the tax
FRPSOLDQFHIUDPHZRUNZKLFKFRXOGFUHDWHVLJQL¿FDQWSUREOHPVZLWKWUDQVODWLQJWKHWKHRU\EHKLQGVWUDWHJLFXQFHUWDLQW\LQWROHVV
XQGHUUHSRUWLQJ´
December 2014 367

law perspective.270HDVXUHVVKRXOGWKHUHIRUHEHWDNHQWRHQDEOHWD[SD\HUVWREHPRUHFHUWDLQDERXWWKHLU
tax liability.
The conventional view is consistent with the policy debates surrounding the introduction of ruling
regimes in Australia and New Zealand. If an advance ruling is sought in Australia or New Zealand, for
example, full disclosure of the facts surrounding a transaction is required from the taxpayer.28 At the time of
the introduction of the rulings regimes, it was anticipated that the reforms would result in reduced litigation
and compliance costs, plus a better relationship between the revenue authorities and taxpayers.29 The story
is similar in the United States. According to Sugarman,30 the reasons for introducing advance tax rulings in
WKH8QLWHG6WDWHVZHUHWZRIROG
5XOLQJVZHUHUHJDUGHGDVEHLQJHVVHQWLDOIRUDQHIIHFWLYHDQGHFRQRPLFDOV\VWHPRIWD[DGPLQLVWUDWLRQ
and
Rulings were expected to be an important source of information for the government.
,IZHDVVXPHIRUWKHVDNHRIDUJXPHQWWKDWWKHFRQYHQWLRQDOYLHZWKDWSURPRWLQJFHUWDLQW\DPRQJWD[SD\HUV
is the principal aim of rulings regimes, then what is the appropriate way to design a rulings system?
-DPHVDQG:DOOVFKXW]N\31GHVFULEHGWKHLVVXHVWREHFRQVLGHUHGLQFUHDWLQJDUXOLQJVV\VWHP7KH¿UVW
LV ZKHWKHU WKH UXOLQJV RQ RIIHU VKRXOG KDYH WKH IRUFH RI TXDVLOHJLVODWLRQ ,Q 1HZ =HDODQG UXOLQJV DUH
binding on the Commissioner but not on taxpayers. In Australia as is the case in New Zealand, rulings
are binding on the Commissioner but not on taxpayers.32 However, if an Australian taxpayer brings the
WHUPVRIDWUDQVDFWLRQZLWKLQWKHDPELWRIDUXOLQJHYHQZLWKQRNQRZOHGJHRIWKHUXOLQJWKH&RPPLVVLRQHU
ZLOODVVHVVWKHWD[SD\HU¶VOLDELOLW\LQWHUPVRIWKHUXOLQJ7KHWD[SD\HULVQRWHQWLWOHGWRFKDOOHQJHDUXOLQJ
if an assessment has been issued in terms of a ruling. In such a case, the only remedy is to challenge the
assessment.33 In New Zealand, the taxpayer can only indirectly challenge the ruling through challenging
the resulting proposed reassessment by the Commissioner. Although rulings, in both Australia and
1HZ=HDODQGDUHELQGLQJRQWKH&RPPLVVLRQHUEXWQRWQHFHVVDULO\RQWD[SD\HUVWKHODUJHPDMRULW\RI
taxpayers customarily follow them, with the result that they become de factoODZ7KLVLVGXHWRWKHULVNV
DVVRFLDWHGZLWKQRWIROORZLQJDUXOLQJZKHQPDNLQJDQDVVHVVPHQWVXFKDVSHQDOWLHVDQGJUHDWHUFKDQFHRI
DQDXGLWDVZHOODVLQLQVWDQFHVZKHQWKHDSSOLFDWLRQRIXQGHUO\LQJODZWRWKHWD[SD\HULVXQFHUWDLQ
Second, consideration must be given to who should have responsibility to issue rulings. James and
:DOOVFKXW]N\VXJJHVWWKH6ZHGLVKPRGHOZKHUHDQLQGHSHQGHQWERG\DSSRLQWHGE\YLUWXHRIWKHLUH[SHUWLVH
in both the private and the public sector issue rulings, has the power to give authoritative decisions, in
27 6HHIRUH[DPSOH<XYDO)HOGPDQDQG6KDKDU/LIVKLW]³%HKLQGWKH9HLORI/HJDO8QFHUWDLQW\´/DZDQG&RQWHPSRUDU\

Problems 133.
28 In some countries, additional information may be required.
29 6DZ\HU³%LQGLQJ5XOLQJVLQ1HZ=HDODQG$Q$VVHVVPHQWRIWKH)LUVW7HQ<HDUV´DERYHQDW
30 Sugarman “Federal Tax Rulings Procedure”, above n 16, at 5.
31 6LPRQ-DPHVDQG,DQ:DOOVFKXW]N\³7KH'HVLJQRIDQ$SSURSULDWH6\VWHPRI7D[5XOLQJV´5HYHQXH/-DW
et seq.
32 In Australia, if a taxpayer chooses not to rely on a private ruling and the position they adopt is shown to be incorrect, they will be
required to pay any underpaid tax. Interest will generally also be payable on that amount. The taxpayer may also be required to
SD\DSHQDOW\LIWKH\GRQRWKDYHDUHDVRQDEO\DUJXDEOHSRVLWLRQRUKDYHQRWWDNHQUHDVRQDEOHFDUH
33 7D[DWLRQ$GPLQLVWUDWLRQ$FW&WKVFKSDUDD

RUGHUWRSUHYHQWFRQÀLFWVRILQWHUHVW34 Scolaro concurs with this view.35 In her opinion, rulings issued by
WKHUHYHQXHDXWKRULWLHVDUHLQKHUHQWO\ELDVHGVLQFHWKDWRI¿FHDOVRDFWVDVWKHWD[FROOHFWRU36 James and
:DOOVFKXW]N\IXUWKHUDUJXHGWKDWWD[SD\HUVVKRXOGEHDEOHWRFKDOOHQJHUXOLQJVZLWKRXWLPSHGLPHQWVVXFK
as cost issues, which can place the challenge process beyond the means of most taxpayers. An additional
FRPSOLFDWLRQIURPWKHFRQYHQWLRQDOYLHZLVWKHIDFWWKDWWKHUHYHQXHDXWKRULW\LQHYLWDEO\KDVVLJQL¿FDQW
resources to contest challenges, with the result that meritorious challenges may be abandoned.37
7KH WKLUG IDFWRU FRQVLGHUHG E\ -DPHV DQG :DOOVFKXW]N\ LV WKH UHVSRQVLYHQHVV RI UXOLQJV WR WD[SD\HU
needs, such as time constraints and access to rulings. In Australia, all rulings, whether public or private, are
SXEOLVKHGDQGDYDLODEOHWRDOOWD[SD\HUVLQDUHGDFWHGIRUPIRUSULYDWHUXOLQJV38 A priority ruling process
KDVEHHQSXWLQWRSODFHIRUDQH[SHGLWHGUXOLQJLIDWUDQVDFWLRQ
,VWLPHVHQVLWLYH
,VSURVSHFWLYH
,VRIPDMRUFRPPHUFLDOVLJQL¿FDQFHDQGUHTXLUHVFRQVLGHUDWLRQDWFRUSRUDWHERDUGOHYHO
+DVDWD[RXWFRPHDVDFULWLFDOHOHPHQWRIWKHWUDQVDFWLRQDQG
Involves complex law or facts that need to be analysed.39
)LQDOO\ DQG DJDLQ RQ WKH SUHVXPSWLRQ WKDW WKH FRQYHQWLRQDO YLHZ LV FRUUHFW -DPHV DQG:DOOVFKXW]N\
SRLQWRXWWKDWDUXOLQJVV\VWHPZRXOGEHQH¿WIURPFOHDUVWDWHPHQWVRISROLF\DVVRFLDWHGZLWKOHJLVODWLRQ
,Q$XVWUDOLDEHIRUHDQ\WD[OHJLVODWLRQLVHQDFWHG7UHDVXU\LVVXHVDFRQVXOWDWLRQGRFXPHQWWKDWVHHNVWKH
views of the public. When the Bill is published, there is an explanatory memorandum setting out the reason
IRUWKHOHJLVODWLRQZK\DSDUWLFXODUDSSURDFKKDVEHHQDGRSWHGDQGWKHPLVFKLHILWVHHNVWRFRUUHFW40 In
addition, the Commissioner issues policy statements on the manner in which certain administrative actions
by revenue staff are to be conducted. These policy statements are expected to indicate to taxpayers that the
$XVWUDOLDQ7D[DWLRQ2I¿FH$72ZLOODFWLQDSDUWLFXODUZD\,QGHHGLIDYLHZLVSXEOLVKHGDVDSXEOLF
ruling, it is binding on the Commissioner.
34 -DPHVDQG:DOOVFKXW]N\DERYHQ
35 'LDQD6FRODUR³7D[5XOLQJV2SLQLRQRU/DZ"7KH1HHGIRUDQ,QGHSHQGHQWµ5XOH0DNHU¶´5HYHQXH/-
36 Margaret McKerchar, Helen Hodgson, and Kalmen Datt “Is there a perception of revenue bias on the part of the ATO in private
ELQGLQJUXOLQJVRQODUJHFRPSOH[LVVXHV"´$7)7KLVUHVHDUFKIRXQGWKHUHZDVQRVXFKELDV
37 Tax authorities are subject to varying degrees of model litigant requirements. In New Zealand, at least, there are requirements
on Inland Revenue and taxpayers with respect to the litigation process, but many taxpayers cannot afford the costs of litigation,
DOWKRXJKLQUDUHFDVHVVXFKDVWKHODUJHEDQNVWD[DYRLGDQFHOLWLJDWLRQWKH\DUJXDEO\KDGJUHDWHUUHVRXUFHVWKDQ,QODQG5HYHQXH
The same applies in Australia.
38 In New Zealand, private rulings are not published, but public rulings and product rulings are. By redacted, we are referring to a
SULYDWHUXOLQJRUHTXLYDOHQWWKDWLVSURYLGHGE\WKHUHYHQXHDXWKRULW\DVDZULWWHQVWDWHPHQWWKDWVHWVIRUWKWKHDSSOLFDELOLW\RI
FHUWDLQVWDWXWHVDQGUHJXODWLRQVWRDVSHFL¿FVHWRIIDFWV+HUHZHDUHUHIHUULQJWRDGRFXPHQWIURPZKLFKVHQVLWLYHDQGSULYDWH
DQGSRWHQWLDOO\DFWLRQDEOHLQIRUPDWLRQKDVEHHQH[SXQJHG
39 $XVWUDOLDQ 7D[DWLRQ 2I¿FH ³3ULRULW\ UXOLQJ SURFHVV´ -XQH ZZZDWRJRYDX! 1HZ =HDODQG KDV UHFHQWO\ LVVXHG
JXLGHOLQHV IRU SUHORGJHPHQW PHHWLQJV ZLWK UHVSHFW WR DSSOLFDWLRQV IRU ELQGLQJ UXOLQJV VHH ,QODQG 5HYHQXH ³*XLGHOLQHV IRU
SUHORGJHPHQWPHHWLQJV´-XQHZZZLUGJRYWQ]WHFKQLFDOWD[!
40 7KHUHLVDVLPLODUDSSURDFKLQ1HZ=HDODQGEXWZLWKWKHDGGLWLRQRIWKH*HQHULF7D[3ROLF\3URFHVV*733VHHIXUWKHU$GULDQ
6DZ\HU³5HYLHZLQJ7D[3ROLF\'HYHORSPHQWLQ1HZ=HDODQG/HVVRQVIURPDGHOLFDWHEDODQFLQJRIµ/DZDQG3ROLWLFV¶´
28 ATF 401.
December 2014 369

2.2 Practice
In the light of the strong and intuitive reasons to favour offering advance tax rulings, it should perhaps
not be surprising that we see binding rulings on offer in many of the leading jurisdictions and, indeed, as
standard international practice.
2.2.1 Australia and New Zealand

,Q$XVWUDOLDDQG1HZ=HDODQGWKHUHDUHWZRPDLQIRUPVRIZULWWHQUXOLQJSXEOLFDQGSULYDWHSURGXFW
DGYDQFHUXOLQJV%RWKDUHOHJLVODWLYHO\ELQGLQJRQWKHUHYHQXHDXWKRULWLHV,QWKH8QLWHG6WDWHVRQWKH
other hand, although not legislatively binding, it seems the courts will hold the Internal Revenue Service
,56WRWKHWHUPVRIDUXOLQJ41
3XEOLFUXOLQJVUHÀHFWWKH&RPPLVVLRQHU¶VRSLQLRQRQKRZDSURYLVLRQRIDWD[ODZLVH[SHFWHGWRDSSO\
3ULYDWHELQGLQJUXOLQJVLQVRPHMXULVGLFWLRQVWKHVHDUHUHIHUUHGWRDVDGYDQFHUXOLQJVDOWKRXJKSULYDWH
UXOLQJVPD\LQIDFWFRYHUSDVWWUDQVDFWLRQVDUHDZULWWHQH[SUHVVLRQRIRSLQLRQRQWKHZD\LQZKLFKWKH
Commissioner considers a relevant provision applies, or would apply, to a taxpayer who has sought an
opinion. A private ruling may deal with anything involved in the application of a relevant provision,
including issues relating to liability, administration, procedure and collection, and ultimate conclusions of
fact.
3XEOLFUXOLQJVLQ$XVWUDOLDDSSO\WRWD[SD\HUVJHQHUDOO\RUDVSHFL¿FFODVVRIWD[SD\HUVZKHUHDVDGYDQFH
rulings only apply to the taxpayer who sought the ruling.42 Notwithstanding this, advance rulings do have
some precedential value if another taxpayer enters into an identical transaction. However, the Commissioner
LVQRWERXQGE\WKHUXOLQJLIDWKLUGSDUW\WULHVWRDYDLOLWVHOIRIWKHUXOLQJ¶VWHUPV43 In contrast, in New Zealand
private rulings cannot be used as any form of precedent, and extreme caution is needed before any reliance
can be placed on an existing published product ruling which is sought to be used as a precedent.
Both New Zealand and Australia also issue product rulings. The Australian Commissioner of Taxation
GHVFULEHVDµSURGXFW¶DV³$QDUUDQJHPHQWZKHUHVHYHUDOSDUWLFLSDQWVLQGLYLGXDOO\HQWHULQWREDVLFDOO\WKH
VDPHDUUDQJHPHQWVFKHPHZLWKDFRPPRQERG\RUDJURXSRIERGLHV´44 A product ruling in Australia
therefore provides certainty to participants or potential participants on the tax consequences of such an
arrangement, provided it is carried out as described in the ruling. It is a form of public ruling. In New Zealand,
a product ruling is similar to a private ruling, but instead may apply to an indeterminate number of taxpayers
at the time it is issued in relation to a particular arrangement.
41 United States v Mead Corp866&WDW

42 7D[DWLRQ$GPLQLVWUDWLRQ$FW&WKVFKVVDQG
43 7KLVRFFXUUHGLQ1HZ=HDODQGZKHUHRQHEDQNREWDLQHGDSULYDWHUXOLQJRQDVFKHPHDQGWKHRWKHUEDQNVHQWHUHGLQWRWKHVDPH
IRUPRIWUDQVDFWLRQUHO\LQJRQWKHUXOLQJREWDLQHGE\WKH¿UVWEDQN7KH&RPPLVVLRQHUVRXJKWWRDWWDFNWKHVHWUDQVDFWLRQVXQGHU
WKHJHQHUDODQWLDYRLGDQFHUXOHV*$$5,QFRPH7D[$FWV%*LQWKH1HZ=HDODQGOHJLVODWLRQDQGZDVVXFFHVVIXO
)RUDGLVFXVVLRQRQWKLVVHULHVRIFDVHVVHH.DOPHQ'DWWDQG$GULDQ6DZ\HU³/LVWHG&RUSRUDWLRQVDQG'LVFORVXUH$XVWUDOLDDQG
1HZ=HDODQG±$&RQWUDVWLQJ\HW&RQYHUJLQJ'\QDPLF´H-RXUQDORI7D[5HVHDUFK6HHDOVR*LYDWL³5HVROYLQJ/HJDO
8QFHUWDLQW\7KH8QIXO¿OOHG3URPLVHRI$GYDQFH7D[5XOLQJV´DERYHQ
44 $XVWUDOLDQ7D[DWLRQ2I¿FH³3URGXFWUXOLQJV´-XQHZZZDWRJRYDX!

7KH1HZ=HDODQGV\VWHPKDVLQWURGXFHGDQHZIRUPRISULYDWHUXOLQJNQRZQDVVWDWXVUXOLQJ$WD[SD\HU
can apply to the Commissioner for a ruling on how a change in the law impacts on an existing private
DGYDQFHUXOLQJ45
In New Zealand, taxpayers must pay for advance rulings. That is, fees are charged for private and product
rulings, including an hourly rate plus disbursements, in addition to whatever fees are charged to taxpayers
E\WKHLUDGYLVHUVLQSUHSDULQJWKHLUDSSOLFDWLRQV8QOLNH1HZ=HDODQGLQ$XVWUDOLDWKHUHLVQRFKDUJHIRU
VHHNLQJ DQ DGYDQFH UXOLQJ$XVWUDOLDQ WD[SD\HUV FDQ DSSHDO DQ XQIDYRXUDEOH DGYDQFH SULYDWH UXOLQJ RU
challenge an assessment based on a public ruling. The same applies for taxpayers in New Zealand for all
types of advance binding rulings.
8VXDOO\GRFXPHQWVLVVXHGE\WKH&RPPLVVLRQHULQFOXGLQJGUDIWUXOLQJVLQ$XVWUDOLDDQG1HZ=HDODQG

do not have the same force as rulings, but if followed, would protect taxpayers against penalties and interest
in most instances.46
$V QRWHG HDUOLHU SULYDWH UXOLQJV DUH ELQGLQJ DJDLQVW WKH UHYHQXH DXWKRULW\ EXW QRW WKH WD[SD\HU LQ
both Australia and New Zealand. Therefore, where a taxpayer has obtained a ruling, the taxpayer can act
FRQIRUPDEO\ZLWKLQWKDWUXOLQJLQFRPSOHWHFRQ¿GHQFHWKDWWKHUHYHQXHDXWKRULW\LVOHJDOO\ERXQGWRGR
so also. This is an outcome that has been secured through legislation.47 There is no way to bind a revenue
DXWKRULW\RUDQRWKHUSXEOLFDXWKRULW\WRDQRQOHJLVODWLYHRUµVRIWODZ¶48 representation at common law.
The history of attempts to raise estoppels against public authorities, including revenue authorities,49 has
EHHQD¿JKWDJDLQVWWKHSULQFLSOHVWKDWDQHVWRSSHOFDQQRWEHHQIRUFHGWRSUHYHQWWKHH[HUFLVHRIDVWDWXWRU\
duty,50 nor can the exercise of a statutory discretion of a public character be prevented by enforcing an
estoppel.51 In other words, as a matter of general law, there is no scope for a revenue authority to adhere
to a ruling that is in breach of legislation, even if it wished to do so. The duty to implement the law is held
WREHSDUDPRXQWRQWKLVYLHZDQGWUDGLWLRQDOO\WKHODZKDVEHHQOHVVNLQGWRLQGLYLGXDOVDVDVXEVHWWKDQ
45 $GULDQ-6DZ\HU³:KDWDUHWKH/HVVRQVIRU$XVWUDOLDIURP1HZ=HDODQG¶V)LUVW&RPSUHKHQVLYH5HPHGLDO5HYLHZRILWV%LQGLQJ
5XOLQJV5HJLPH"´$75HYDW$VWDWXVUXOLQJFDQWKHUHIRUHEHLQUHODWLRQWRDQH[LVWLQJSULYDWHUXOLQJRUSURGXFW
ruling.
46 6HH&KDQWDO5DKPDQ³7D[2I¿FHSXEOLVKHGDGYLFHSURGXFWVGLVWLQJXLVKHG´$//DW
47 )RU$XVWUDOLD VHH SW ,9& RI WKH7D[DWLRQ$GPLQLVWUDWLRQ$FW &WK ,Q WKH FDVH RI 1HZ =HDODQG VHH SW $ RI WKH7D[
Administration Act 1994.
48 6HH*UHJ:HHNV³7KH8VHDQG(QIRUFHPHQWRI6RIW/DZE\$XVWUDOLDQ3XEOLF$XWKRULWLHV´)/5HY
49 *UHJ:HHNV³(VWRSSHODQG3XEOLF$XWKRULWLHV([DPLQLQJWKH&DVHIRUDQ(TXLWDEOH5HPHG\´-(TDW
50 Maritime Electric Co Ltd v General Dairies Ltd>@$&>@$OO(53&
51 Southend-on-Sea Corp v Hodgson (Wickford) Ltd>@4%>@$OO(54%DWSHU/RUG3DUNHU&-
cf Lever Finance Ltd v Westminster (City) London Borough Council>@4%>@$OO(5&$DW
per Lord Denning MR.
December 2014 371

to taxpayers generally.52 This explains why, for example, the Australian and New Zealand systems, under
which private advance rulings are binding on the ATO and IRD respectively, needed to be created under
legislation rather than as a matter of agency or government policy. Thus, a system of binding rulings can
EHTXLWHKHOSIXOWRDWD[DGPLQLVWUDWLRQWKDWZDQWVWRFRPPLWFUHGLEO\WREHLQJIDLUWRWD[SD\HUVZKRVHHN
JXLGDQFHXSRQZKLFKWKH\FDQFRQ¿GHQWO\DFW
The utility of the ability of the tax authorities to commit to applying a binding ruling can also be witnessed
LQ WKH 8QLWHG .LQJGRP 7KHUH WKH +RXVH RI /RUGV SULRU WR WKH HVWDEOLVKPHQW RI WKH 6XSUHPH &RXUW
eventually decided to allow claims for estoppels against public authorities,53 and subsequently held that
public law estoppel was unnecessary following the development of the doctrine of substantive enforcement
of legitimate expectations.54 This public law doctrine was later held by the House of Lords to have “already
absorbed whatever is useful from the moral values which underlie the private law concept of estoppel”,55
with the clear implication that the public law legitimate expectation doctrine would provide a more
principled basis for holding public authorities to their soft law and other representations.
The substantive legitimate expectation doctrine has not been universally adopted outside the
United Kingdom. It has been rejected temporarily in South Africa,56 equivocally in Canada57 and with
sustained aggression in Australia.58 It is developing in New Zealand, albeit with some remaining limitations
not present in the United Kingdom doctrine.59 This indicates that the binding nature of an advance ruling
regime may be even more desirable in jurisdictions where there are no public law protections, since there is
little else for taxpayers to rely upon. The availability of an advance tax ruling may be relatively important as
an expression of the trustworthiness of the tax administration, where, for example, they offer up a binding
UXOLQJLQFLUFXPVWDQFHVZKHUHWKHUHLVOLWWOHLQWKHZD\RIRWKHUVDIHJXDUGVDYDLODEOHWRWD[SD\HUVDQGWKLV
FDQUHPDLQWKHFDVHHYHQLIWKHSURWHFWLRQLVOLWWOHXVHGLQSUDFWLFH
52 )RUDQH[DPSOHRIWKLVLPEDODQFHDQGµELDV¶LQD1HZ=HDODQGFRQWH[W0DUWLQREVHUYHV
³,QWKHZULWHU¶VYLHZWKHFXUUHQWSRVLWLRQLQJDQGZHLJKWLQJRIREOLJDWLRQVDQGULJKWVLQVVDQG$>RIWKH7D[$GPLQLVWUDWLRQ$FW@QHHGV
UHFRQ¿JXULQJEHFDXVHDQLQGLYLGXDOWD[SD\HU¶VFRQWHQWLRQDERXW,5'EHKDYLRXUEUHDFKLQJWKHLU³ULJKWV´LQDPDWHULDOZD\ZLOOLQYDULDEO\EH
UHTXLUHGWRJRKHDGWRKHDGZLWKWKH,5'¶VRYHUDOOWD[³LQWHJULW\´UHVSRQVLELOLWLHVZKLFKLQFOXGHWKHREOLJDWLRQRIWKH,5'WRPD[LPLVHWKH
FROOHFWLRQRIWD[HVKDYLQJUHJDUGWRLWVUHVRXUFHVDQGWKHLPSRUWDQFHRISURPRWLQJWKHWD[FRPSOLDQFHRIDOOWD[SD\HUV«
While there is much to admire about the New Zealand tax system the limitations described in this article suggest that aspects of the current system
are out of balance because it does not adequately recognise and protect the rights of individual taxpayers in important areas.”
Denham Martin “Honest Taxpayers Need Advocates and Real Rights” NZ Lawyer 212-XO\DW
53 See R v Inland Revenue Commissioners; ex parte Preston>@$&>@$OO(5>@:/5+/
54 7KH VWDUWLQJ SRLQW IRU WKLV GRFWULQH LV XVXDOO\ WUDFHG WR WKH &RXUW RI$SSHDO¶V GHFLVLRQ LQ R v North and East Devon Health
Authority; ex parte Coughlan>@4%>@$OO(5>@:/5&$
55 R v East Sussex County Council; ex parte Reprotech (Pebsham) Ltd [2002] UKHL 8, [2002] 4 All ER 58, [2003] 1 WLR 348,
at 66, 358, [35] per Lord Hoffmann.
56 Duncan v Minister of Environmental Affairs and Tourism>@=$6&$>@$OO6$6$DW>@
per Brand JA.
57 Mount Sinai Hospital Center v Quebec 0LQLVWHU RI +HDOWK DQG 6RFLDO 6HUYLFHV 6&& >@ 6&5 DW >@
per Binnie J.
58 The initial rejection of Coughlan came in Re Minister for Immigration and Multicultural Affairs; ex parte Lam [2003] HCA 6,
&/5DFDVHLQZKLFKCoughlan had not even been raised in argument. The High Court has recently indicated that
LWVYLHZKDVQRWVRIWHQHGVHHWKHdictumRI*XPPRZ+D\QH&UHQQDQDQG%HOO--WKDW³WKHSKUDVHµOHJLWLPDWHH[SHFWDWLRQ¶ZKHQ
XVHGLQWKH¿HOGRISXEOLFODZHLWKHUDGGVQRWKLQJRUSRVHVPRUHTXHVWLRQVWKDQLWDQVZHUVDQGWKXVLVDQXQIRUWXQDWHH[SUHVVLRQ
ZKLFKVKRXOGEHGLVUHJDUGHG´Plaintiff S10/2011 v Minister for Immigration and Citizenship>@+&$&/5
$/-5DW>@
59 6HH 5LFKDUG )ODQDJDQ ³/HJLWLPDWH ([SHFWDWLRQ DQG$SSOLFDWLRQV ±$Q 2XWGDWHG DQG 8QQHHGHG 'LVWLQFWLRQ´ &DQWD
LR 283.

Where advance rulings are binding,60 at least on the revenue authority, the conventional approach
suggests that they can be valuable to taxpayers in that the rulings enable them to plan their affairs in a clear
understanding of their tax liability. It is trite to point out that tax legislation is complicated, but the confusion
that it can engender is mitigated where there is advice from the revenue authority in the form of an advance
ruling and which is able to be relied upon by the taxpayer. This is so even in the event that the revenue
authority changes its mind about the meaning or effect of the legislation, or has a different interpretation
pressed upon it by the courts. By contrast, where advance rulings do not bind the revenue authority,61 they
RIIHUQRJUHDWHUVHFXULW\WRWKHWD[SD\HUWKDQDQ\RWKHUVRIWODZLQVWUXPHQWRUUHSUHVHQWDWLRQ6SHFL¿FDOO\
VXFKUXOLQJVDUHYXOQHUDEOHWRQHZLQWHUSUHWDWLRQVRIWD[OHJLVODWLRQE\WKHFRXUWVIROORZLQJZKLFKDQRZ
incorrect view of the law in a ruling cannot be enforced, regardless of the wishes of the revenue authority.
6XFKDODFNRIFHUWDLQW\LVDVKDPHLIIRUQRRWKHUUHDVRQWKDQWKDWDGYLFHIURPWKHUHYHQXHDXWKRULW\VKRXOG
mean more than advice from the person who sits down next to you on the bus. We discussed earlier why it
VXLWVUHYHQXHDXWKRULWLHVWRXVHDGYDQFHWD[UXOLQJV7KHUHLVKRZHYHUDULVNWKDWIHZWD[SD\HUVZLOODVNIRU
WKHPLIWKH\FDQWDNHQRFRPIRUWWKDWWKHFRQWHQWRIWKHUXOLQJVZLOOQRWFKDQJHOHDYLQJWKHPH[SRVHGWRD
tax liability for which they had not planned.
In New Zealand, there is no publicly available data on the applicants for rulings, but Inland Revenue
reports on the number of issues raised in applications in its annual report to Parliament. The reports indicate
that Inland Revenue is achieving most of its performance targets in relation to rulings since 2011.62 From
a conventional perspective, a major problem with the New Zealand rulings system has been the delays in
¿QDOLVLQJDQGLVVXLQJSULYDWHUXOLQJVDORQJZLWKWKHUHODWLYHO\ORZQXPEHURISXEOLFUXOLQJV6XFKGHOD\V
PDNHUXOLQJVOHVVDWWUDFWLYHIURPWKHSHUVSHFWLYHRIWD[SD\HUVWKRXJKDVFDQYDVVHGDERYHWKHUHDUHRI
FRXUVHVWUDWHJLFPRWLYDWLRQVWKDWPDNHUXOLQJVUHODWLYHO\XQDWWUDFWLYH,QSDUWWKLVLVDGLUHFWFRQVHTXHQFH
RI D FHQWUDOLVHG V\VWHP WKDW IRFXVHV RQ ³JHWWLQJ LW ULJKW´ WKURXJK D ULJRURXV DQDO\VLV RI WKH ODZ ZKLFK
LV VXPPDULVHG LQ WKH FRPPHQWDU\ WKDW DFFRPSDQLHV WKH UXOLQJ ,Q ,QODQG 5HYHQXH¶V DQQXDO UHSRUWV D
common theme has been the failure to meet targets set by Inland Revenue with respect to issuing rulings,
including timeliness.63 Of course, this is also consistent with the necessity of having talented professionals
ZLWKLQ WKH WD[ DGPLQLVWUDWLRQ PDNLQJ DGYDQFH WD[ UXOLQJV VLQFH LW FDQ EH GDPDJLQJ WR KDYH XQXVXDOO\
WD[SD\HUIULHQGO\ SRVLWLRQV HQGRUVHG WKURXJK DQ DGYDQFH UXOLQJ HYHQ LI WKH\ DUH RWKHUZLVH MXVWL¿DEOH
Similarly, to the extent that the most sophisticated public servants are assigned to provide advance tax
UXOLQJVLWPDNHVLWOHVVDWWUDFWLYHWRWD[SD\HUVWRVHHNWKHUXOLQJVVLQFHIDOVHSRVLWLYHVDUHOHVVOLNHO\WR
result from close scrutiny of transactions by the most competent tax administrators.
,Q6XVDQ3ULFH'LUHFWRURI,QODQG5HYHQXH¶V3XEOLF5XOLQJV8QLWSURYLGHGDQRXWOLQHRIKRZWKH
8QLW ZRUNV LQ WHUPV RI WKH SURMHFW WHDPV VHOHFWLRQ RI WRSLFV FRQVXOWDWLRQ DQG WLPHIUDPH IRU SURYLGLQJ
public rulings.64 6KH LGHQWL¿HG IXWXUH LQLWLDWLYHV WR LPSURYH VWDNHKROGHU UHODWLRQVKLSV LPSOHPHQWLQJ
suggestions from a customer survey, and enhancement of the process with a focus on improving timeliness.
)HHGEDFN YLD VXEPLVVLRQV IURP WKH 1HZ =HDODQG ,QVWLWXWH RI &KDUWHUHG$FFRXQWDQWV 1=,&$ LQ
60 $VLVWKHFDVHLQERWK1HZ=HDODQGDQG$XVWUDOLDVHHSW$RIWKH7D[$GPLQLVWUDWLRQ$FWDQGSW,9&RIWKH7D[DWLRQ
$GPLQLVWUDWLRQ$FW&WKUHVSHFWLYHO\
61 As is the case in Canada, where the Canadian Revenue Authority has stated that it will bind itself by such rulings with respect to
WKHWD[SD\HUWRZKRPHDFKLVLVVXHGVHH&DQDGD5HYHQXH$JHQF\³,QFRPH7D[,QIRUPDWLRQ&LUFXODU,&5$GYDQFH,QFRPH
7D[5XOLQJVDQG7HFKQLFDO,QWHUSUHWDWLRQV´$XJXVWDW>@
62 Inland Revenue Annual Report 2011%:HOOLQJWRQ
63 See Sawyer, above n 15.
64 6XVDQ3ULFH³,QODQG5HYHQXH¶V3XEOLF5XOLQJV8QLW´Taxation Today 181HZ=HDODQG0D\
December 2014 373

VXJJHVWHGWKDWWLPHOLQHVVWR¿QDOLVHSXEOLFUXOLQJVDQGSULRULWLVDWLRQUHPDLQRXWVWDQGLQJLVVXHVRIFRQFHUQ
for the profession.65 In 2012, the NZICA commented that “[t]he Binding Ruling regime is a very slow and
expensive process that is only useful to a very limited number of taxpayers.”66
1HYHUWKHOHVVLWZRXOGDSSHDUIURP,QODQG5HYHQXH¶VSHUVSHFWLYHDWOHDVWWKDWWKHIRUHVKDGRZHGFKDQJHV

SURGXFHGWKHGHVLUHGRXWFRPH,QWKH$QQXDO5HSRUW,QODQG5HYHQXHFRPPHQWHGWKDW67
3URYLGLQJWD[SD\HUUXOLQJVDVTXLFNO\DVSRVVLEOHLVLPSRUWDQWIRURXUFXVWRPHUVWRXQGHUVWDQGWKHWD[LPSOLFDWLRQV
of their plans. :HVLJQL¿FDQWO\UHGXFHGWKHGHOLYHU\WLPHRIRXUUXOLQJVE\LQWURGXFLQJLPSURYHGSURFHVVHVDQG
better project management7KLV\HDUZHGHOLYHUHGPRUHGUDIWWD[SD\HUUXOLQJVWKDQLQDQGWRRN
20% less time to do them.
)URPWKHWUDGLWLRQDOSHUVSHFWLYHWKDWUXOLQJVDUHEHQH¿FLDOEHFDXVHWKH\UHGXFHWD[SD\HUXQFHUWDLQW\WKLV
is good news.
2.2.2 United Kingdom

$OWKRXJKWKHUHLVQRIRUPDOV\VWHPRIDGYDQFHUXOLQJVRUFOHDUDQFHVIURP+05HYHQXH &XVWRPV
+05&LQWKH8QLWHG.LQJGRP+05&SURYLGHVDQH[WHQVLYHFOHDUDQFHVHUYLFHIRUEXVLQHVVWD[SD\HUV
6XFKQRQVWDWXWRU\FOHDUDQFHVSURYLGHWD[SD\HUVZLWK+05&¶VYLHZRIZKDWLVWKHFRUUHFWWD[WUHDWPHQW
They do not strictly bind HMRC but HMRC would nonetheless often be obliged to honour them under
the doctrine of legitimate expectations.68 As outlined above,69 the United Kingdom has embraced this
GRFWULQHZKLFKKDVWKHPRUDOIRUFHRIHVWRSSHOEXWLVGLUHFWHGVSHFL¿FDOO\DWSXEOLFODZGHFLVLRQPDNHUV
Nonetheless, substantive protection of legitimate expectations by the United Kingdom courts has limits, as
the Supreme Court demonstrated in R (Davies) v Commissioners for Her Majesty’s Revenue and Customs.70
7KH 6XSUHPH &RXUW RI WKH 8QLWHG .LQJGRP¶V GHFLVLRQV LQ WKHVH MRLQHG DSSHDOV ZHUH ORQJ DZDLWHG
particularly amongst tax advisers, but were ultimately not received with anything more than unbridled
VDWLVIDFWLRQ(DFKDSSHDOKDGEURDGO\VLPLODUIDFWVWKHDSSHOODQWVZHUHHDFK%ULWLVKFLWL]HQVZKRZHUHERUQ
DQGKDGZRUNHGLQWKH8QLWHG.LQJGRPHDFKSXUFKDVHGUHVLGHQWLDOSURSHUW\RXWVLGHWKH8QLWHG.LQJGRP
LQ ZKLFK WKH\ OLYHG IRU VRPH PRQWKV HYHU\ \HDU HDFK DSSHOODQW QRQHWKHOHVV PDLQWDLQHG WLHV WR WKH
United Kingdom and returned every year. The appellants did not wish to have the status of being “resident”
LQWKH8QLWHG.LQJGRPVLQFHWKH\ZRXOGWKHQKDYHEHHQUHTXLUHGWRSD\WD[HV±VXFKDVLQFRPHWD[DQG
FDSLWDOJDLQVWD[±WRZKLFKWKH\ZRXOGQRWKDYHEHHQVXEMHFWLIWKH\ZHUH³UHVLGHQW´DEURDGLQ%HOJLXP
DQGWKH6H\FKHOOHVUHVSHFWLYHO\
Between 1999 and 2009, HMRC published a soft law instrument called IR20 which, amongst other things,
purported to offer guidance as to when a person could be said to be “resident” in the United Kingdom. The
65 1=,&$³)HHGEDFNRQGUDIWZRUNSURJUDPPH´$XJXVWZZZQ]LFDFRP!

66 1=,&$³6WDWXVRIWKH&RPPLVVLRQHU¶V$GYLFH±,16´$XJXVWZZZQ]LFDFRP!
67 Inland Revenue Annual Report 2012%:HOOLQJWRQDWHPSKDVLVDGGHG
68 6HH-XGLWK)UHHGPDQDQG-RKQ9HOOD³+05&¶V0DQDJHPHQWRIWKH8.7D[6\VWHP7KH%RXQGDULHVRI/HJLWLPDWH'LVFUHWLRQ´
LQ&KULV(YDQV-XGLWK)UHHGPDQDQG5LFKDUG.UHYHUHGVThe Delicate Balance: Tax, Discretion and the Rule of Law,%)'
$PVWHUGDPDW
69 $QG VHH *UHJ :HHNV ³+ROGLQJ *RYHUQPHQW WR LWV :RUG /HJLWLPDWH ([SHFWDWLRQV DQG (VWRSSHOV LQ $GPLQLVWUDWLYH /DZ´
LQ 0DWWKHZ *URYHV HG Modern Administrative Law in Australia: Concepts and Context &DPEULGJH 8QLYHUVLW\ 3UHVV
3RUW0HOERXUQH
70 R (Davies) v Commissioners for Her Majesty’s Revenue and Customs [2011] UKSC 47, [2011] 1 WLR 2625.

DSSHOODQWVFRQWHQGHG¿UVWWKDWZKHQSURSHUO\FRQVWUXHG,5³FRQWDLQHGDPRUHEHQHYROHQWLQWHUSUHWDWLRQ
RIWKHFLUFXPVWDQFHVLQZKLFKDQLQGLYLGXDOEHFRPHVQRQUHVLGHQWDQGQRWRUGLQDULO\UHVLGHQWLQWKH8.
WKDQLVUHÀHFWHGLQWKHRUGLQDU\ODZDQGWKDWWKHDSSHOODQWVKDGDOHJLWLPDWHH[SHFWDWLRQ«WKDWWKHPRUH
benevolent interpretation would be applied to the determination of their status for tax purposes”. Their
second contention was that, regardless of the construction of IR20, “it was the settled practice of the
UHYHQXHWRDGRSW>DPRUHEHQHYROHQWLQWHUSUHWDWLRQWKDQLVUHÀHFWHGLQWKHRUGLQDU\ODZ@DQGWKDWWKHSUDFWLFH
was such as to give rise to a legitimate expectation … that the interpretation would be applied to the
determination of their status.”71
7KHSDUWLHVDJUHHGWKDW³UHVLGHQFH´LVQRWDFRQFHSWZKLFKWKHVWDWXWHGH¿QHGQRUZDVWKHFDVHODZFOHDU
or of easy application, all of which left a gap on a matter of some practical importance which IR20 sought
WR¿OOLQTXLWHVSHFL¿FWHUPV7KHDSSHOODQWVWKHUHIRUHLQYLWHGWKH6XSUHPH&RXUWDQGWKH&RXUWRI$SSHDO
before it, to construe IR20 as though it were a legislative instrument. The appellants clearly hoped that
this approach would steer them around the troublesome and contentious case law which held that a person
RQO\FHDVHVWREHRUGLQDULO\UHVLGHQWLQWKH8QLWHG.LQJGRPLIVKHPDNHV³DGLVWLQFWEUHDN´7KLVZDVQRW
a requirement that was given clear expression in IR20, a circumstance of which Lord Mance made much in
his dissenting speech,72 although Lord Wilson accorded it much less importance, saying that “if invited to
summarise what [IR20] required, [the ordinarily sophisticated taxpayer] might reasonably have done so in
WKUHHZRUGVDGLVWLQFWEUHDN´73
7KH DSSHOODQWV¶ FODLPHG UHOLDQFH RQ ,5 UDWKHU WKDQ WKH FDVH ODZ ZDV QRW QHFHVVDULO\ D F\QLFDO
manipulation of the tax system. Their submissions to the Court of Appeal indicated genuine dismay that
+05&UHIXVHGWRDSSO\WKHWHUPVRI,5DVWKHDSSHOODQWVXQGHUVWRRGWKHP+05&¶VDSSURDFKKDGEHHQ
FKDUDFWHULVHGDVD³EHWUD\DORIWUXVW´DQG0RVHV/-ZDVGULYHQWRFRPPHQWWKDW74
… from time to time in the meandering course of these proceedings, it has appeared that the appellants, their
DGYLVHUV DQG WKH WD[DWLRQ SURIHVVLRQ KDYH GRXEWHG ZKHWKHU ,5 FDQ EH UHOLHG XSRQ DW DOO WKH\ KDUERXU WKH
suspicion that the Revenue regards itself as free to apply or to disapply its guidance, as it chooses. They describe
IR20 as misleading and a trap.
'HVSLWHWKHDSSHOODQWV¶UHODWLYHVRSKLVWLFDWLRQDQGWKDWRIWKHLUDGYLVHUVWKH\KDGHYHU\UHDVRQWRUHO\
upon IR20 rather than to reach their own views as to the requirements of the law. Lord Mance noted
WKDW WKH ¿UVW DSSHOODQWV ZHUH DGYLVHG E\ ³DFFRXQWDQWV UDWKHU WKDQ ODZ\HUV DQG FRUUHVSRQGLQJO\ >ZHUH@
LQWHUHVWHGLQ+05&¶VXQGHUVWDQGLQJDQGSUDFWLFHUDWKHUWKDQSUHSDUHGWRDWWHPSWH[KDXVWLYHDQDO\VLVRI
legal authority.”75
7KLVLVDQH[FHOOHQWH[DPSOHRIWKHGLI¿FXOWLHVLQKHUHQWLQUXOLQJVV\VWHPVXQGHUZKLFKDPELJXLWLHVDUH
able to be resolved against taxpayers. The appellants were unsuccessful in large measure due to the fact that
71 At 2629, [1] per Lord Wilson.

72 $W>@SHU/RUG0DQFHFIDW>@SHU/RUG+RSH
73 At 2644, [45] per Lord Wilson.
74 R (Davies) v Commissioners for Her Majesty’s Revenue & Customs [2010] EWCA Civ 83 at [20].
75 R (Davies) v Commissioners for Her Majesty’s Revenue and CustomsDERYHQDW>@SHU/RUG0DQFHFIDW>@
per Lord Wilson.
December 2014 375

IR20 was expressed in equivocal terms as providing “general guidance only”, a disclaimer whose effect is
reminiscent of the result in Hedley Byrne.76
Having issued guidance in the form of an advance ruling instrument, should HMRC have been allowed
to contest those who followed the guidance so issued by stating that it was only “general” and pointing to
inconsistent and contested case law to support its own contrary conclusions? HMRC stated throughout that
it would submit to an order to give substantive effect to any legitimate expectation it could be held to have
FUHDWHGLQWKHDSSHOODQWVDOWKRXJKWKHUHLVORQJVWDQGLQJSUHFHGHQWWKDW+05&FDQDJUHHQRWWRHQIRUFHWKH
law to the full in its discretion.77 In the end, the point was not central to the outcome of the case because
Lord Wilson held that the relevant paragraphs of IR20 were “very poorly drafted” and expressed doubt that
WKH\ZHUHVXI¿FLHQWO\SUHFLVHWRJHQHUDWHDOHJLWLPDWHH[SHFWDWLRQLQWKH¿UVWSODFH
More than the result in DaviesWKLVVSHFL¿FRXWFRPHLVDFDXVHIRUVLJQL¿FDQWFRQFHUQ:KHUHSHRSOH

indeed sophisticated businessmen with professional advisers, read and rely upon soft law, how can it be
DQ\NLQGRIUHVSRQVHWRVD\WKDWQRWKLQJFDQEHGRQHEHFDXVHWKHVRIWODZZDVVREDGO\GUDIWHGLQWKH¿UVW
SODFH"7KH¿QGLQJRIWKH6XSUHPH&RXUWPXVWEHGLVWLQJXLVKHGIURPH[DPSOHVRIEDGO\GUDIWHGOHJLVODWLRQ
which primarily become the problem of lawyers who are trained to deal with legislative drafting, be it good,
bad or indifferent. Rulings, on the other hand, are presented as an accessible guide to the requirements of
WD[OHJLVODWLRQDVXQGHUVWRRGE\UHYHQXHDXWKRULWLHVDQGDUHWKHUHIRUHPRUHOLNHO\WREHUHOLHGXSRQE\
people who would never dream of attempting to extract meaning from legislation through its application
WRWKHLUWD[DIIDLUV7KH6XSUHPH&RXUW¶VDSSURDFKSODFHVWKHULVNIRUSRRUGUDIWLQJRIVXFKUXOLQJVXSRQ
WKH FODLPDQW ± ZKR DIWHU DOO ZDV VXI¿FLHQWO\ DEOH WR XQGHUVWDQG ,5 WR UHO\ XSRQ LW ± UDWKHU WKDQ WKH
SXEOLFDXWKRULW\UHVSRQVLEOHIRUWKHSRRUGUDIWLQJ3XWPRUHEULHÀ\LWLVDNLQWRVD\LQJWKDWDQDGYDQFHG
UXOLQJPHDQVQRWKLQJWKHUHYHQXHDXWKRULW\ZKLFKLVVXHVLWFDQDYRLGLWVHIIHFWVZLWKFDUHIXOGLVFODLPHUVRU
careless drafting. A poorly drafted Act cannot be dismissed in this way.
2.2.3 United States

,Q WKH 8QLWHG 6WDWHV WKH 7UHDVXU\ DXWKRULVHV JXLGDQFH LQ WKH IRUP RI UHYHQXH UXOLQJV SURYLGLQJ WKH
,56¶VLQWHUSUHWDWLRQRIH[LVWLQJWD[ODZVDVDSSOLHGWRK\SRWKHWLFDOIDFWVUHYHQXHSURFHGXUHVDUWLFXODWHG
SURFHGXUDO UXOHV DQG QRWLFHV LQIRUPDO VWDWHPHQWV RI ,56 SROLF\ RQ HQIRUFHPHQW DQG RWKHU PDWWHUV78
While not strictly binding on taxpayers, subsequent practice and interpretations of the United States courts
indicate that taxpayers may be penalised if they fail to determine their tax liabilities or otherwise act
inconsistently with such legal interpretations set out in revenue rulings, procedures and notices. Given such
JXLGDQFHLVXVXDOO\QRWWD[SD\HULQLWLDWHGRQHFDQQRWVWDWHWKDWWKH8QLWHG6WDWHVRSHUDWHVDV\VWHPDNLQWR
an advance rulings system as discussed in this article. Consequently, we have limited our discussion on the
8QLWHG6WDWHV¶VH[WHQVLYHSURFHVVRISULYDWHOHWWHUUXOLQJV
76 Hedley Byrne & Co Ltd v Heller & Partners Ltd>@$&>@$OO(5>@:/5+/FIR v Inland
Revenue Commissioners; ex parte MFK Underwriting Agents Ltd>@$OO(5>@:/54%DW
per Bingham LJ, cited in R (Davies) v Commissioners for Her Majesty’s Revenue and CustomsDERYHQDW>@
per Lord Wilson.
77 See Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, [1981]
$OO(5>@:/5+/
78 6HH .ULVWLQ ( +LFNPDQ ³7KH 3URPLVH DQG WKH 5HDOLW\ RI 86 7D[ $GPLQLVWUDWLRQ´ LQ &KULV (YDQV -XGLWK )UHHGPDQ DQG
5LFKDUG.UHYHUHGVThe Delicate Balance: Tax, Discretion and the Rule of Law,%)'$PVWHUGDPDW

2.2.4 Canada
,Q&DQDGDWD[SD\HUVFDQUHTXHVWDQRSLQLRQIURPWKH&DQDGD5HYHQXH$JHQF\&5$RQDSDUWLFXODU
WUDQVDFWLRQRUVHWRIIDFWV7KHVHUXOLQJVDUHQRWVWULFWO\ELQGLQJRQWKH&5$EXWUDWKHUWKH&5$LVWDNHQWR
intend to bind itself by these rulings with respect to the taxpayer to whom the ruling is issued.79
2.2.5 Other jurisdictions

7KHH[WHQWWRZKLFKELQGLQJUXOLQJVV\VWHPVDUHDNH\IHDWXUHRIWD[V\VWHPVJOREDOO\LVFOHDULQDUHFHQW
2(&' *OREDO )RUXP RQ 7D[$GPLQLVWUDWLRQ VXUYH\ RI 2(&' DQG QRQ2(&' FRXQWULHV WKDW IRXQG
that 48 had a public rulings system. The number with a private rulings system is also growing,80 although
WKHGLIIHUHQFHVEHWZHHQWKHUHJLPHVLVVLJQL¿FDQWLQDQXPEHURIUHVSHFWVLQFOXGLQJZKHWKHUWKHWD[SD\HU
is bound by the ruling and the extent to which the tax authority is bound. This emphasises the need for a
taxpayer to examine closely each regime as part of determining whether to pursue a private ruling and
the extent to which the taxpayer can rely upon a public ruling. Furthermore, jurisdictions are continually
modifying their rulings regimes, including their breadth and any fees associated with them.81
,QWKH+RQJ.RQJ6SHFLDO$GPLQLVWUDWLYH5HJLRQ+.6$5DGYDQFHUXOLQJVRQDOLPLWHGVFDOHKDYHEHHQ

in place since 2000. Feinschreiber and Kent82 comment that advance rulings should provide taxpayers with
DGH¿QHGDUHDRIFHUWDLQW\ZLWKUHVSHFWWRWKHWD[SRVLWLRQRIEXVLQHVVRSHUDWLRQV7KHSULPDU\LPSHWXVRI
the HKSAR Inland Revenue is s 14 of the Inland Revenue Ordinance concerning certain service activities.
Caution is encouraged in terms of how far businesses can rely on these rulings in general when they are
SXEOLVKHGLQDUHGDFWHGIRUPDWWKDWLVZLWKLGHQWLI\LQJSHUVRQDOLQIRUPDWLRQUHPRYHG
7KH+.6$5,QODQG5HYHQXHUHJXODUO\LVVXHV'HSDUWPHQWDO,QWHUSUHWDWLRQDQG3UDFWLFH1RWHV',31V
and while not binding on the HKSAR Inland Revenue, they are crucial for taxpayers and their advisers in
GHWHUPLQLQJWKHLUWD[OLDELOLW\+DON\DUGDUJXHVWKDWWKHVHDUHVRIWODZDQGDUHSHUYDVLYH:LWKWKHGLI¿FXOWLHV
in pursuing legal action in the HKSAR, this emphasises the importance of DIPNs and elevates their status.83
South Africa provides for advance rulings through their income tax legislation. The South African
5HYHQXH6HUYLFH6$56SURYLGHVDFRPSUHKHQVLYHVHUYLFHXQGHUWKHVWDWXWRU\UHJLPHIRUELQGLQJSULYDWH
UXOLQJVDQGQRQELQGLQJSULYDWHRSLQLRQV6XFKUXOLQJVGRQRWELQGWD[SD\HUV0D]DQVN\FRPPHQWVWKDW
6$56 ZRXOG SUHIHU WR KDYH IHZHU GLVFUHWLRQV DQG KHQFH UXOLQJV LVVXHG LQ IDYRXU RI REMHFWLYH FULWHULD
79 6HH .LP %URRNV ³$ 5HDVRQDEOH %DODQFH 5HYHQXH$XWKRULW\ 'LVFUHWLRQV DQG WKH 5XOH RI /DZ LQ &DQDGD´ LQ &KULV (YDQV
-XGLWK)UHHGPDQDQG5LFKDUG.UHYHUHGVThe Delicate Balance: Tax, Discretion and the Rule of Law,%)'$PVWHUGDP
DW
80 6HH7DPX1:ULJKW³,)$3DQHOLVWV([SORUH$SSURDFKHVWR$GYDQFH7D[5XOLQJVLQ6L[1DWLRQV´7D[0DQDJHPHQW
Transfer Pricing Report 404. The six nations were Canada, France, India, Poland, Switzerland and the United States.
81 6HHIRUH[DPSOHWKHFDVHRI*HUPDQ\'LHWHU(QGUHVDQG$QGUHZ0LOHV³*HUPDQ\1HZ5XOHVIRU%LQGLQJ5XOLQJV±0LQLVWU\
RI)LQDQFH'HFUHH´)HEUXDU\,QWHUQDWLRQDO7D[5HSRUWDQG$[HO(LJHOVKRYHQDQG6XVDQQH7RPVRQ³*HUPDQ\)HHVIRU
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from the norm, an advance ruling is binding on the taxpayer but not on the tax authority. Various changes were introduced to the
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82 5REHUW)HLQVFKUHLEHUDQG0DUJDUHW.HQW³+RQJ.RQJ$GYDQFH5XOLQJ&DVHV±7D[DELOLW\RI3UR¿WV´&RUSRUDWH
Business Taxation Monthly 31.
83 $QGUHZ+DON\DUG³5HYHQXH$XWKRULW\'LVFUHWLRQVDQGWKH5XOHRI/DZLQ+RQJ.RQJ´LQ&KULV(YDQV-XGLWK)UHHGPDQDQG
5LFKDUG .UHYHU HGV The Delicate Balance: Tax, Discretion and the Rule of Law ,%)' $PVWHUGDP DW
DQG
December 2014 377

written into the tax legislation.84 Such a view is contrary to most other jurisdictions. Evans et al also include
country discussions on the advance rulings practices in several European countries, including France,
Hungary, Italy and the Netherlands.85
-XULVGLFWLRQVWKDWKDYHLQWURGXFHGELQGLQJUXOLQJVUHJLPHVLQWKHODVWIHZ\HDUVLQFOXGH6RXWK.RUHDLQ
86$XVWULDLQ87DQG/LWKXDQLDLQ887KH3HRSOH¶V5HSXEOLFRI&KLQD&KLQDZDVGXH
to announce the commencement of a pilot scheme for advance tax rulings during the latter part of 2012
IRFXVLQJRQODUJHHQWHUSULVHVWKDWKDYHDFRPSOLDQFHDJUHHPHQWZLWKWKH&KLQHVHWD[DXWKRULWLHV5HFHQWO\
WKH6WDWH$GPLQLVWUDWLRQRI7D[DWLRQ6$7RI&KLQDLVVXHGSXEOLF&LUFXODULQZKLFKWKH6$7FRQ¿UPHG
that a pilot program for an advance ruling system will be introduced for large enterprises. The Circular was
LVVXHG DQG HIIHFWLYH RQ 'HFHPEHU 8QGHU WKH SLORW DGYDQFH UXOLQJ SURJUDP WKH LQFKDUJH WD[
authority should issue an advance ruling on the tax treatment of a contemplated transaction when requested
E\DQHOLJLEOHODUJHHQWHUSULVH$VDW)HEUXDU\GHWDLOVRIWKHSLORWDGYDQFHUXOLQJSURJUDPKDGQRW
been released.897KH6$7ZLOOOLNHO\LVVXHLPSOHPHQWLQJUXOHVODWHU,WLVH[SHFWHGWKDWRQO\DVHOHFWQXPEHU
RIHQWHUSULVHVZLOOEHHOLJLEOHWRSDUWLFLSDWHLQWKHSLORWDGYDQFHUXOLQJSURJUDP7KLVLVDXVHIXOOHDGLQWR
the next section, where we examine the patterns in adoption of advance tax rulings regimes.
2.3 Patterns in Adoption of Advance Tax Rulings Regimes

We used regression analysis to establish whether there is any connection between the timing of the
adoption of advance tax rulings regimes and broader social and economic features of the jurisdictions
WUDFNHGE\WKH2(&'2XUDQDO\VHVRISDQHOGDWDRIUXOLQJVSUDFWLFHVSXEOLVKHGE\WKH2(&'GRQRWVKRZ
DQ\UHOLDEOHFRUUHODWLRQVRIREVHUYHGSUDFWLFHZLWKDQ\RIWKHVRFLDORUHFRQRPLFIXQGDPHQWDOVWUDFNHGE\
WKH:RUOG%DQN90 We tested numerous indicators from the World Development Indicators database, which
include 214 countries and hundreds of discrete measures from topical areas. These include agriculture
and rural development, aid effectiveness, climate change, economic policy and external debt, education,
HQHUJ\DQGPLQLQJHQYLURQPHQWWKH¿QDQFLDOVHFWRUJHQGHUKHDOWKLQGLFDWRUVLQIUDVWUXFWXUHODERXUDQG
social protection, poverty, the private sector, the public sector, science and technology, social development
and urban development.91:HZHUHQRWDEOHWR¿QGDQ\VWDWLVWLFDOO\UREXVWFRQQHFWLRQVEHWZHHQDQ\RIWKH
underlying variables and the OECD data on reported advance tax rulings practices from 1990 to 2013.
+RZHYHU WKH DQDO\VLV VXJJHVWV WKDW WKH LQWURGXFWLRQ RI D ELQGLQJ UXOLQJV V\VWHP LV DFFRPSDQLHG RU
IROORZHGVRRQDIWHUE\WKHIRUPDOLVDWLRQRIVHOIDVVHVVPHQWIRUH[DPSOH$XVWUDOLDDQG1HZ=HDODQG
UHSUHVHQWVDPRGHUQLVDWLRQRIDQHPHUJLQJQDWLRQIRUH[DPSOH&KLQDRUIROORZVGHFLVLRQVRIWKHFRXUWV
84 (UQHVW 0D]DQVN\ ³5HYHQXH$XWKRULW\ 'LVFUHWLRQV DQG WKH 5XOH RI /DZ 6RXWK$IULFD´ LQ &KULV (YDQV -XGLWK )UHHGPDQ DQG
5LFKDUG.UHYHUHGVThe Delicate Balance: Tax, Discretion and the Rule of Law,%)'$PVWHUGDPDW
85 &KULV (YDQV -XGLWK )UHHGPDQ DQG 5LFKDUG .UHYHU HGV The Delicate Balance: Tax, Discretion and the Rule of Law ,%)'
$PVWHUGDP)UDQFHDW+XQJDU\DW,WDO\DWDQGWKH1HWKHUODQGVDW
86 +HQU\$QDQG'DYLG-LQ<RXQJ/HH³,QWURGXFWLRQRIDGYDQFHUXOLQJSURJUDPPH´,QWHUQDWLRQDO7D[5HYLHZ
87 6HH+HUWD9DQDV³,QWURGXFWLRQRIDQ$GYDQFH5XOLQJLQ$XVWULD´7D[3ODQQLQJ,QWHUQDWLRQDO5HYLHZ
88 6HH5RNDV'DXJHOD³%LQGLQJ5XOLQJV,QWURGXFHGLQ/LWKXDQLD´(XURSHDQ7D[DWLRQ
89 ³&KLQD&RQ¿UPVD3LORW$GYDQFHUXOLQJ3URJUDPIRU/DUJH(QWHUSULVHV´%DNHU 0F.HQ]LHChina Tax Monthly-DQXDU\)HEUXDU\

90 7KH:RUOG%DQNWorld Development Indicators 2012:DVKLQJWRQ'&7KHGHWDLOVRIRXUUHJUHVVLRQDQDO\VLVDUHQRW
reported here as they are extensive and do not provide any clear relationships. However, they are available upon request from the
authors.
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indicator/all.

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8QLWHG.LQJGRP
The upshot of the foregoing discussion is that while individual regimes have their particular design
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create a system that is capable of providing greater certainty to taxpayers with respect to their prospective
tax liability. This observation then raises the question of when theoretically should we expect taxpayers
WRVHHNDUXOLQJDKHDGRIWLPHLQWKHIDFHRIOHJLVODWLYHDQGDGPLQLVWUDWLYHXQFHUWDLQW\DQGZKDWIHDWXUHV
may enhance the attractiveness of rulings regimes for governments and for taxpayers? Having outlined the
EDFNJURXQGWRRXUUHYLHZZHWXUQQRZWRUHVSRQGLQJWRWKHNH\UHVHDUFKTXHVWLRQVVHWRXWHDUOLHU
3.0 WHEN SHOULD TAXPAYERS SEEK ADVANCE TAX RULINGS?

The theoretical literature has only relatively recently turned to an analysis of when taxpayers would
rationally want to secure an advance tax ruling. As explained above in section 2.3, the conventional view has
EHHQWKDWUXOLQJVDUHGHVLUDEOHEHFDXVHWKH\UHGXFHULVNWRWD[SD\HUVRIDQXQSOHDVDQWVXUSULVHVXUURXQGLQJ
future tax obligations.92&RQVHTXHQWO\WD[SD\HUVHLWKHUXQGHUWDNLQJHFRQRPLFDOO\VLJQL¿FDQWWUDQVDFWLRQV
RUZKRDUHSDUWLFXODUO\VHQVLWLYHWRULVNRIIXWXUHXQH[SHFWHGWD[H[SRVXUHZRXOGEHQH¿WIURPDQGPDNH
use of the availability of advance tax rulings. On this view, it was expected that the cost of the ruling
ZRXOGRIWHQEHPRUHWKDQRIIVHWE\WKHDGYDQWDJHVDVVRFLDWHGZLWKUHGXFWLRQRUHOLPLQDWLRQRIWKHULVNRI
unexpected future tax liability. This is particularly important for large taxpayers where management of their
WD[ULVNLVFULWLFDOWRWKHLU¿QDQFLDODQGUHSXWDWLRQDOVWDQGLQJ,QDGGLWLRQWRDGYDQFHUXOLQJVDQXPEHURI
jurisdictions are trialling cooperative compliance programmes93DVDPHDQVRIUHGXFLQJWD[ULVNIRUERWK
WKHUHYHQXHDXWKRULW\DQGWKHFRUSRUDWHWD[SD\HUWKDWSURYLGHDVVXUDQFHVWRODUJHWD[SD\HUVWKDWWKH\KDYH
robust systems and are overall compliant, reducing the need for regular audits.
The more recent theoretical literature contests the conventional view by emphasising that, aside from
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UXOLQJWKHUHLVDVWUDWHJLFHOHPHQWWKDWLVRIWHQDQLPSRUWDQWFRQVLGHUDWLRQZKHQWD[SD\HUVFRQVLGHUVHHNLQJ
a ruling. Givati94UHIHUVWRWZRSULPDU\IDFWRUVLQÀXHQFLQJWD[SD\HUVZKHQFRQVLGHULQJZKHWKHURUQRWWR
DSSO\IRUDUXOLQJ7KHVHDUHFRVWFRQVLGHUDWLRQVGLUHFWDQGLQGLUHFWDQGVWUDWHJLFFRQVLGHUDWLRQV)RUWKH
VDNHRIDQDO\VLV*LYDWLDVVXPHVWKDWWKHUHZRXOGLQHYLWDEO\EHFRVWVDVVRFLDWHGZLWKWU\LQJWRDVVHVVRQH¶V
WD[OLDELOLW\EHIRUHHQWHULQJLQWRDQ\HFRQRPLFDOO\VLJQL¿FDQWWUDQVDFWLRQDQGWKDWDQ\DGGLWLRQDOFRVWVLQ
applying for a ruling would be relatively insubstantial.957KHHPSKDVLVRI*LYDWL¶VDQDO\VLVLVWKHUHIRUHRQ
the strategic factors.
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from the revenue authorities.96 The reason for this potentially increased scrutiny is that an application
IRUDUXOLQJVSHFL¿FDOO\LQYLWHVVFUXWLQ\972QWKHÀLSVLGHLIDWUDQVDFWLRQZHUHURXWLQHDQGXVXDODQGWKH
92 See section 2.1 above.

93 See, for example, the ATO in Australia and Inland Revenue in New Zealand.
94 6HH*LYDWL³5HVROYLQJ/HJDO8QFHUWDLQW\7KH8QIXO¿OOHG3URPLVHRI$GYDQFH7D[5XOLQJV´DERYHQ
95 $W6HHDOVRWKHVXEVHTXHQWUHVHDUFKXWLOLVLQJ*LYDWL¶VVWXG\DERYHQ
96 At 16.
97 $W
December 2014 379

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RIWHQWKHFDVHWKDWWKHWD[DXWKRULWLHV¶EHVWDQGPRVWFRPSHWHQWHPSOR\HHVSDUWLFLSDWHLQSURYLGLQJUXOLQJV
QRWOHDVWEHFDXVHWKHWUDQVDFWLRQVIRUZKLFKWD[SD\HUVVHHNUXOLQJVDUHQRYHODQGSURYLGHVLJQL¿FDQWWD[
EHQH¿WV
7R WKH H[WHQW WKDW VHHNLQJ DQ DGYDQFH UXOLQJ LQYLWHV FORVHU VFUXWLQ\ E\ PRUH FDSDEOH SXEOLF VHUYDQWV
WKHQLWIROORZVWKDWLIDQDGYDQFHUXOLQJLVQRWVRXJKWWKHUHYHQXHH[DPLQHUDXGLWRULVPRUHOLNHO\WR
PDNHDPLVWDNHLQDVVHVVLQJWKHWD[SD\HU,QWKHDEVHQFHRIDQDGYDQFHWD[UXOLQJLIDPLVWDNHLVPDGHLQ
WKHWD[SD\HU¶VIDYRXUWKHQWKHWD[SD\HUZRXOGHQMR\WKHWD[EHQH¿WVFODLPHG,IDPLVWDNHLVPDGHWRWKH
WD[SD\HU¶VGLVDGYDQWDJHHLWKHUDQLQIRUPDORUDMXGLFLDOFKDOOHQJHZRXOGEHDYDLODEOH7KLV¿UVWVWUDWHJLF
FRQVLGHUDWLRQVXJJHVWVWKDWLWLVLQPDQ\FDVHVEHWWHUQRWWRDVNIRUDUXOLQJDQGWU\WKH³DXGLWORWWHU\´WKDQ
to apply for a ruling and invite scrutiny of tax plans ex ante.
A second98LPSRUWDQWVWUDWHJLFIDFWRULVWKHWD[SD\HUV¶FRPPLWPHQWWRFDUU\RXWWKHWUDQVDFWLRQ7KHUHDUH
FDVHVZKHUHLWPD\SD\DWD[SD\HUQRWWRVHHNDUXOLQJLQDGYDQFHLQRUGHUWRFRPPLWFUHGLEO\WRFDUU\LQJRXW
the transaction. If a transaction is completed and an adverse assessment is made by the tax administration,
KDYLQJDOUHDG\FRPSOHWHGWKHWUDQVDFWLRQUDWKHUWKDQVLPSO\SURSRVLQJWKHWUDQVDFWLRQPD\EHQH¿WWKH
taxpayer.99 If, instead, an adverse advance ruling had been issued, the taxpayer might either have complied
ZLWKWKHUXOLQJRUKDYHFKRVHQWRIRUJRWKHSURSRVHGWUDQVDFWLRQDQGJRQHEDFNWRWKHGUDZLQJERDUGWR
amend the transaction to avoid the adverse tax consequences. If a ruling is not sought in advance but rather,
in subsequent tax litigation, the taxpayer claims to have relied on an ambiguous tax provision, it may be
VWUDWHJLFDOO\XVHIXOWRWKHWD[SD\HU,QGHHGWKHJRYHUQPHQWPD\EHUHOXFWDQWWRFKDOOHQJHWKHWD[SD\HU¶V
interpretation in court for fear of an adverse precedent being set against its view. Instead, the government
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D IDYRXUDEOH UXOLQJ LQ DGYDQFH7KLV KDV DQ DGGHG EHQH¿W IRU WKH JRYHUQPHQW VLQFH LW GRHV QRW KDYH WR
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EHWKHFDVHZLWKDQDGYDQFHWD[UXOLQJ
An earlier contribution by Belz100LGHQWL¿HGDUDQJHRIIDFWRUVWKDWZRXOGEHFRQVLGHUHGE\WD[SD\HUV

EHIRUHWKH\GHWHUPLQHWRDSSO\IRUDQDGYDQFHUXOLQJ7KHVHIDFWRUVLQFOXGH
• 7KHSRVVLELOLW\RIDQXQIDYRXUDEOHUXOLQJ
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• 7KH ULVN RI WKH 5HYHQXH TXHU\LQJ LVVXHV QRW DQWLFLSDWHG E\ WKH WD[SD\HU DQG XQFRQQHFWHG WR WKH
transaction for which a ruling was sought.
,QDSRLQWWKDWLVUHODWHGWR*LYDWL¶V¿UVWVWUDWHJLFFRQVLGHUDWLRQEHWWHUWRSOD\WKHDXGLWORWWHU\WKDQLQYLWH
VFUXWLQ\WKURXJKDUXOLQJDSSOLFDWLRQWKHIDFWVWKDWDWD[SD\HUPD\ZLWKGUDZDQDSSOLFDWLRQIRUDUXOLQJRU
that the Commissioner declines to rule, may not help. This is because the revenue authority will already be
aware of the issues surrounding the particular transaction.101 If an adverse ruling is obtained, taxpayers have
WKUHHPDLQRSWLRQVDYDLODEOHDEDQGRQWKHWUDQVDFWLRQOLWLJDWHWKHUXOLQJRUDPHQGWKHWUDQVDFWLRQ(DFKKDV
98 At 21 et seq.
99 At 24.
100 6DXO&%HO]³)HGHUDO7D[5XOLQJV3URFHGXUHDQG3ROLF\´9DQG/5HYDW
101 6HH*LYDWL³5HVROYLQJ/HJDO8QFHUWDLQW\7KH8QIXO¿OOHG3URPLVHRI$GYDQFH7D[5XOLQJV´DERYHQDW

FRVWLPSOLFDWLRQVIRUWD[SD\HUV&RQVLVWHQWO\ZLWK*LYDWL¶VFRQFOXVLRQ%HO]VXJJHVWVWD[SD\HUVWDNHJUHDW
care when deciding whether to apply for an advance ruling.102
There are strategic reasons why in some circumstances an advance ruling may be attractive to taxpayers.
*LYDWLLGHQWL¿HVWZRVXFKVWUDWHJLFUHDVRQV,QWKHSUHYLRXVVHFWLRQPHQWLRQZDVPDGHRIWKHWUDGLWLRQDO
view that one of the basic reasons for a rulings regime was to give transactional certainty to taxpayers and
provide protections against unexpected additional future tax liability. Indeed, notwithstanding the above
VWUDWHJLFFRQVLGHUDWLRQVWKDWIDYRXUQRWVHHNLQJDUXOLQJLQVRPHFLUFXPVWDQFHVVHHNLQJDQDGYDQFHUXOLQJ
PD\EHWKHEHVWRSWLRQVLQFHLWFDQUHGXFHWKHSRVVLELOLW\RIKDYLQJVXQNLQYHVWPHQWVDSSURSULDWHGex post
by the government.1037DNLQJDQDJJUHVVLYHWD[SRVLWLRQWKDWLVQRWODWHUVXVWDLQDEOHFDQOHDGWRLQWHUHVWDQG
penalties in addition to the tax that would originally have been payable. In most tax systems, however,
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DQGLQJRRGIDLWKLWLVQRWOLNHO\WKDWWKHWD[SD\HUZLOOEHUHTXLUHGWRSD\SHQDOWLHV
We would emphasise and restate comments by Givati, including his second strategic consideration
VXSSRUWLQJ VHHNLQJ D UXOLQJ ZKLFK LV WR DOORZ D WD[SD\HU WR WKUHDWHQ WR not carry out the transaction if
WKHUXOLQJLVQRWLQWKHWD[SD\HU¶VIDYRXU7KLVVRUWRIVWUDWHJLFFRQVLGHUDWLRQLVHDVLHVWWRLPDJLQHLQWKH
FDVHRID¿UPWKDWLVVLPXOWDQHRXVO\DSSURDFKLQJVHYHUDOMXULVGLFWLRQVWREHWKHSRWHQWLDOGHVWLQDWLRQIRUD
VLJQL¿FDQWQHZLQYHVWPHQW,IWKHWD[SD\HUDSSOLHVIRUDGYDQFHWD[UXOLQJVLQVHYHUDOMXULVGLFWLRQVFODLPLQJ
advantageous treatment from all of them, then the governments will understand that providing an adverse
UXOLQJZLOOPHDQWKDWWKHLQYHVWPHQWZLOOOLNHO\EHPDGHHOVHZKHUHZLWKWKHUHVXOWWKDWWKDWJRYHUQPHQW
ZLOOFROOHFWQRDGGLWLRQDOWD[%HWWHUWKHUHDVRQLQJJRHVIURPWKHJRYHUQPHQW¶VSHUVSHFWLYHWRSURYLGHD
IDYRXUDEOHUXOLQJLQRUGHUWRVHFXUHWKHLQYHVWPHQWDQGLWVFROODWHUDOHFRQRPLFEHQH¿WV2IFRXUVHLWFRXOG
be argued that this strategic consideration favouring applying for tax rulings is not truly about tax rulings
per se IRU H[DPSOH WKH JRYHUQPHQW FRXOG VLPSO\ JLYH DQ DGYHUVH WD[ UXOLQJ EXW SURYLGH D PRUH WKDQ
RIIVHWWLQJJXDUDQWHHRIDWDLORUHGDQGEHWWHUWDUJHWHGOXPSVXPVXEVLG\WRDWWUDFWWKH¿UP¶VLQYHVWPHQW
,Q DGGLWLRQ WKH JRYHUQPHQW PLJKW EH UHOXFWDQW WR SURYLGH WKH DGYDQWDJHV WR WKH ¿UP LQ WKH IRUP RI DQ
advance tax ruling because it might provide a precedent for other taxpayers to claim similar advantages
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Other theoretical literature does not rely on the strategic elements facing taxpayers in showing that
there is, from a theoretical perspective, a surprising undesirability of advance tax rulings. For example,
0DUNXV 'LOOHU DQG 3LD 9ROOHUW PRGHO WKH FKRLFH RI WD[SD\HUV FKRRVLQJ WR VHFXUH DQ DGYDQFH WD[ UXOLQJ
DQG¿QGWKDWDQDGYDQFHWD[UXOLQJLVDSWWREHZRUWKOHVVWRWD[SD\HUVH[FHSWZKHUHDWUDQVDFWLRQLVRQO\
PDUJLQDOO\HFRQRPLFDOO\SUR¿WDEOH$FFRUGLQJWRWKHDXWKRUV³WKHHFRQRPLFLQWXLWLRQRIWKLVVXUSULVLQJ
UHVXOWLVWKDWIRUKLJKO\SUR¿WDEOHWUDQVDFWLRQVWKHWD[SD\HUZLOOQRWEHZLOOLQJWRSD\IRULQIRUPDWLRQRQWKH
tax consequences as he will carry out the investment anyway.”104`
Warner, in an Australian context, offers a helpful summary of situations when a taxpayer should, and
VKRXOGQRWVHHNDSULYDWHUXOLQJ105,QDGYLFHWKDWHFKRHVWKHVWUDWHJLFLQFHQWLYHVLGHQWL¿HGLQWKHWKHRUHWLFDO
literature, summarised by Givati and consistently with the great caution urged by Belz, Warner emphasises
102 See Belz, above n 100.

103 $GMXGLFDWLRQDOVRUDLVHVWKHKROGXSSUREOHPUDLVHGE\*LYDWLDQGUHIHUUHGWRDERYH
104 Diller and Vollert, above n 8, at 15.
105 +HOHQ:DUQHU³3ULYDWHELQGLQJUXOLQJV±DUHWKH\ZRUWKZKLOH"´7D[DWLRQLQ$XVWUDOLD6HHDOVRDFRPPHQWRQ
VHYHUDO$72SUDFWLFHVWDWHPHQWVZLWKUHVSHFWWR$72DGYLFHPDWHULDOVQDPHO\36/$36/$DQG36/$
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December 2014 381

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circumstances. In her conclusion, she comments on a Joint Committee of Public Accounts and Audit
-&3$$REVHUYDWLRQWKDWLQHDFKVXFFHVVLYH\HDUWKH$72KDVEHHQLVVXLQJIHZHUSULYDWHUXOLQJV:DUQHU
suggests that the cost, delay and various downsides associated with private binding rulings may explain this
trend. It is quite possible, too, that sophisticated Australian taxpayers are learning from experience that the
balance of strategic incentives does not typically favour securing advance tax rulings. Alternatively, in what
LVHVVHQWLDOO\WKHSRVVLELOLW\UDLVHGE\WKHPRGHORI'LOOHUDQG9ROOHUWPDQ\WD[SD\HUV¿QGWKDWFHUWDLQW\
SURYLGHGE\WKHWD[FRQVHTXHQFHVZRXOGQRWFKDQJHWKHLUDFWXDOWUDQVDFWLRQDOGHFLVLRQVLQDQ\HYHQW±VR
why bother securing a ruling?
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advance tax rulings are important in order to safeguard and promote the rule of law and protect taxpayers from
WKHULVNRIXQH[SHFWHGDGGLWLRQDOIXWXUHWD[OLDELOLW\FDQQRWHDVLO\EHJDLQVDLG7KHUXOHRIODZLVLPSRUWDQW
and the belief in the probity and fairness of the tax administration is also an important consideration in
the progressive tax administration and the responsive regulation approach adopted in many jurisdictions,
including Australia and New Zealand. Nevertheless, in our view the strategic considerations outlined above
WKDWWHQGWRFRXQVHODJDLQVWVHFXULQJDQDGYDQFHWD[UXOLQJDUHSRZHUIXOVXFKWKDW
Advance rulings may merely serve to invite closer scrutiny by the most talented tax auditors and it
PD\EHEHWWHUWRWDNHDQDJJUHVVLYHWD[SRVLWLRQDQGH[SHFWZLWKDKLJKHUSUREDELOLW\WRVXFFHHGLQ
sustaining that position ex post either through relatively lax scrutiny or by prevailing in litigation, and
The commitment to carry out the transaction despite the disapproval of the tax authorities is valuable,
not least because having done the transaction the public nature of adjudication and adverse precedents
may be less attractive to the government than merely accepting a relatively undesirable position coming
out of an audit.
The traditional view that advance tax rulings are extremely important for their role in promoting certainty
and contributing to a perception of the fairness of tax administration among taxpayers thus contrasts sharply
ZLWKWKHVWUDWHJLFFRQVLGHUDWLRQVVXJJHVWLQJWKDWWD[SD\HUVVKRXOGEHH[WUHPHO\FDUHIXOLQGHFLGLQJWRVHHN
advance tax rulings.
We now turn to what the theoretical literature suggests are the circumstances in which governments will
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4.0 WHEN SHOULD GOVERNMENTS OFFER ADVANCE TAX RULINGS?

In a recent paper,106 Givati argues that advance tax rulings are an attractive tool for governments in
GHWHUPLQLQJWKHWD[WUHDWPHQWRIWUDQVDFWLRQVZKHQFHUWDLQFRQGLWLRQVDUHVDWLV¿HG+LVFRQWHQWLRQLVWKDW
advance tax rulings are best regarded as one of four strategies that governments use in the tax context
to achieve a possible range of policy objectives. Furthermore, they can play a valuable role when the
JRYHUQPHQWZDQWVWRSURYLGHWDLORUHGWD[WUHDWPHQWWRDVSHFL¿FFDWHJRU\RIWD[SD\HUVZKRVHPHPEHUVDUH
QRWWRRQXPHURXVDQGZKHUHLWLVGLI¿FXOWWRFUDIWDUXOHex ante to address a given situation because the
WD[SD\HU¶VFLUFXPVWDQFHVDUHWRRVSHFL¿FWRLQFRUSRUDWHLQWROHJLVODWLRQDQGUHJXODWLRQV7KXVUXOLQJVFDQ
EHUHJDUGHGDVDZD\IRUJRYHUQPHQWVWR¿OOJDSVLQXQGHUVSHFL¿HGWD[ODZDQGWD[ODZLVLQHYLWDEO\JRLQJ
WREHXQGHUVSHFL¿HGMXVWDVFRQWUDFWVDUHDOZD\VXQGHUVSHFL¿HG)RUH[DPSOHJLYHQWKHVL]HDEOHFRVWV
106 6HH*LYDWL³5HVROYLQJ/HJDO8QFHUWDLQW\7KH8QIXO¿OOHG3URPLVHRI$GYDQFH7D[5XOLQJV´DERYHQ

associated with dispute resolution, an advance ruling may be the catalyst that enables a transaction with
HFRQRPLFYDOXHDGGIRUDMXULVGLFWLRQWREHLPSOHPHQWHG7KHRWKHUVWUDWHJLHVLQFOXGH
The traditional legislative tool of ex anteUXOHPDNLQJ
Adjudication when taxpayers ex post GRQRWDJUHHZLWKWKHUHTXLUHPHQWVRIWKHODZDQG
Licensing.
These strategies differ in two particular ways. One is in their timing. The other is in their breadth. With
UHVSHFWWRWLPLQJUXOHPDNLQJOLFHQVLQJDQGDGYDQFHWD[UXOLQJVDUHex ante approaches, while adjudication
is an ex postLQVWUXPHQW$GYDQFHUXOLQJVDOORZWKHWD[SD\HUWRGHWHUPLQHWKHWLPHRIWKHSROLF\PDNLQJE\
the Revenue.107 With respect to breadth, licensing and advance tax rulings are narrow instruments, while
UXOHPDNLQJLVDQLQVWUXPHQWRIEURDGDSSOLFDWLRQ
Givati suggests that a revenue authority, in determining which strategy to adopt, will inter aliaWDNHLQWR
account which process will result in the greatest level of revenues.108 A more plausible account in our view
would be the realisation of a certain revenue target with the least amount of administrative and adjudicative
effort. Indeed, the authors are of the view that for revenue authorities to adopt a particular policy based on
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IDFWPD\OHDGWRSHUYHUVHSROLF\SUHVFULSWLRQV,QWHUQDWLRQDOH[SHULHQFHFRPSHOOLQJO\VXJJHVWVWKDWWUXVW
is an essential component of the relationship between taxpayers and the revenue authority.109 A naïve tax
PD[LPLVDWLRQDSSURDFKLVOLNHO\WREHVHOIGHIHDWLQJVLQFHLWLPSOLHVDWOHDVWDUHYHQXHELDVRQWKHSDUW
of the revenue authorities when determining strategies on how to administer a tax system.110 Naïve tax
PD[LPLVDWLRQRQWKHSDUWRIWKHWD[DXWKRULWLHVLVOLNHO\LQLPLFDOWRWKHSURSHURSHUDWLRQRIDVHOIDVVHVVPHQW
UHJLPHLQWKHPHGLXPWRORQJUXQ,QWKLVUHJDUGWKH&RPPLVVLRQHURI7D[DWLRQLQ$XVWUDOLDKDVVWDWHGWKDW
from the perspective of the ATO the obligation of taxpayers is to pay the tax imposed by law, not a penny
more and not a penny less.111 The Commissioner expressly accepts that tax minimisation is the legitimate
concern and right of all taxpayers.112
2Q WKH RWKHU KDQG D VRSKLVWLFDWHG YHUVLRQ RI *LYDWL¶V YLHZ ZRXOG DFFRPPRGDWH WKLV REMHFWLRQ DQG
concede that fostering trust is indeed an important element of tax maximisation. Our own view is that
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capacity that requires fostering of trust is a more accurate and plausible characterisation. In any event,
107 At 20.
108 6HHIRUH[DPSOH*LYDWL³5HVROYLQJ/HJDO8QFHUWDLQW\7KH8QIXO¿OOHG3URPLVHRI$GYDQFH7D[5XOLQJV´DERYHQDW
It is accepted that Givati emphasises that this is but one policy objective available to revenue authorities.
109 See, for example, Valerie Braithwaite and John Braithwaite “An Evolving Compliance Model for Tax Enforcement” in Neal
6KRYHUDQG-RKQ3DXO:ULJKWHGVCrimes of Privilege: Readings in White-Collar Crime2[IRUG8QLYHUVLW\3UHVV1HZ<RUN
±DYHUVLRQLVDYDLODEOHDW$XVWUDOLDQ1DWLRQDO8QLYHUVLW\'LJLWDO&ROOHFWLRQVKWWSVGLJLWDOFROOHFWLRQVDQXHGXDX!DQG
(ULFK .LUFKOHU (ULN +RHO]O DQG ,QJULG:DKO ³(QIRUFHG YHUVXV9ROXQWDU\7D[ &RPSOLDQFH7KH µ6OLSSHU\ 6ORSH¶ )UDPHZRUN´
-RXUQDORI(FRQRPLF3V\FKRORJ\
110 Revenue authorities are of course entitled to ensure that such policies as they adopt result in the greatest revenue provided always
WKLVLVDVPDQGDWHGE\WKHODZ,QD1HZ=HDODQGFRQWH[WWKH&KLHI7D[&RXQVHO0DUWLQ6PLWKKDVVRXJKWWRHPSKDVLVHRQ
VHYHUDORFFDVLRQVWRRQHRIWKHDXWKRUVWKDWWKHDSSURDFKRI,QODQG5HYHQXHLVQRWWREHSURUHYHQXHZKHQSUHSDULQJDUXOLQJ
EXWWRWDNHDEDODQFHGDSSURDFKWKDWUHÀHFWVLQ,QODQG5HYHQXH¶VYLHZDWOHDVWWKHDSSURSULDWHDSSOLFDWLRQRIWKHODZWRWKH
arrangement.
111 One of the authors was present at a conference where the current Australian Commissioner of Taxation made this statement.
112 6HH IRU H[DPSOH 0LFKDHO &DUPRG\ IRUPHU &RPPLVVLRQHU RI 7D[DWLRQ ³0DQDJLQJ &RPSOLDQFH´ VSHHFK WR 7KH 7DVPDQLDQ
&KDPEHURI&RPPHUFHDQG,QGXVWU\6HSWHPEHU
December 2014 383

WKHJRYHUQPHQW¶VSUREOHPIURPWKHUHYHQXHSHUVSHFWLYHLVWKDWLUUHVSHFWLYHRIWKH ex ante policy approach

DGRSWHGWKDWLVRWKHUWKDQDGMXGLFDWLRQLWLVXQDZDUHRIKRZWD[SD\HUVZLOOUHDFWWRQHZWD[UXOHV113 After
WKHIDFWLQWKHFDVHRIDGMXGLFDWLRQWKHWD[DXWKRULW\KDVNQRZOHGJHRIWKHWUDQVDFWLRQDQGWKHSDUWLFXODU
circumstances of the taxpayer.114
Givati suggests that in choosing between ex post adjudication and ex anteUXOHPDNLQJWD[DXWKRULWLHV

ZLOOUHO\RQWKHNQRZOHGJHWKHDXWKRULW\EHOLHYHVWKDWLWKDVDERXWWD[SD\HUV,IWKHDXWKRULWLHVDUHFRQ¿GHQW
WKDWWKH\NQRZKRZLQJHQHUDOWD[SD\HUVZLOOUHDFWWRWKHFKDQJHLQWD[ODZWKHQWKHDXWKRULW\ZLOOFKRRVH
UXOHPDNLQJ 2WKHUZLVH WKH WD[ DXWKRULW\ ZLOO FKRRVH DGMXGLFDWLRQ VLQFH DGMXGLFDWLRQ ZLOO DOORZ WKH
JRYHUQPHQW WR REWDLQ DGGLWLRQDO LQIRUPDWLRQ DQG WR WDLORU LWV DSSURDFK RSWLPDOO\ WR D SDUWLFXODU ¿UP¶V
circumstances.115
Among the other ex ante approaches, the difference between advance rulings and licensing is that, with
DGYDQFH UXOLQJV D ¿UP VHOIVHOHFWV LQWR WKH DGYDQFH WD[ UXOLQJ WUHDWPHQW DQG GHWHUPLQHV WKH WLPLQJ RI
WKHDSSOLFDWLRQDQGLQGHHGZKHWKHUWRSXUVXHWKHUXOLQJ2QWKHRWKHUKDQGZLWKOLFHQVLQJWKH¿UPLV
HIIHFWLYHO\IRUFHGWRDSSO\IRUDTXDVLDGYDQFHUXOLQJLQRUGHUWRHQDEOHLWWRFDUU\RQEXVLQHVV+RZHYHULI
WKHDXWKRULW\ZLVKHVWRSURKLELWFHUWDLQW\SHVRIFRQGXFWUXOHPDNLQJLVSUHIHUDEOHWROLFHQVLQJ7KHUHDVRQ
LVWKDWLIWKHPDMRULW\RIUHTXHVWVZRXOGLQDQ\HYHQWEHGHQLHGWKHUHLVOLWWOHEHQH¿WWRSXWWLQJLQWRSODFHD
OLFHQVLQJUHJLPH:KHUHDOORUDOPRVWDOOUXOLQJVZRXOGEHQHJDWLYHUXOHPDNLQJLVFKHDSHUWRLPSOHPHQW
and on the whole superior to licensing. There is only one rule and no consideration need be given to
individual circumstances.116
Ultimately, the ability to tailor ex ante the way in which the law will be applied stands as one of the great
DWWUDFWLRQVWRWKHJRYHUQPHQWRILVVXLQJDGYDQFHUXOLQJV5XOLQJVFDQPDNHWKHODZPRUHGLUHFWO\DSSOLFDEOH
to individual taxpayers and thereby obviate the need for extensive detail to be included in the legislation.
Rulings are a species of soft law.117 Soft law has little or no legislative basis and is therefore relatively
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proceedings, despite tending to be treated as though it were binding by the public at large. Rulings are cheap
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challenge legally, particularly in Australia, Canada, and New Zealand, which have rejected the doctrine of
substantive legitimate expectations, albeit with different levels of conviction.118
*LYDWLFRQVLGHUVDQXPEHURIRWKHUIDFWRUVWKDWPD\LPSDFWRQZKLFKSROLF\±OLFHQVLQJUXOHPDNLQJ
DGMXGLFDWLRQRUDGYDQFHUXOLQJV±LVFKRVHQE\WKHJRYHUQPHQW7KH¿UVWLVWKHSRVVLELOLW\RIDQDSSHDO
Appeals in Australia have no impact on what is stated in a ruling or advance ruling. It is accepted that the
revenue authority may try to ensure the ruling applies the law to the facts. Taxpayers may initiate appeals
whether the appeal is against an assessment or advance ruling.
113 *LYDWL³5HVROYLQJ/HJDO8QFHUWDLQW\7KH8QIXO¿OOHG3URPLVHRI$GYDQFH7D[5XOLQJV´DERYHQDW
114 :LWKDGMXGLFDWLRQ*LYDWLUHIHUVWRZKDWKHGHVFULEHVDVKROGXSLVVXHWKDWGRHVQRWDULVHZLWKRWKHUSROLF\RSWLRQVDW
115 $W
116 $W
117 6HH 0DUN$URQVRQ ³3ULYDWH %RGLHV 3XEOLF 3RZHU DQG 6RIW /DZ LQ WKH +LJK &RXUW´ )/ 5HY 5RELQ &UH\NH DQG
-RKQ0F0LOODQ³6RIW/DZY+DUG/DZ´LQ/LQGD3HDUVRQ&DURO+DUORZDQG0LFKDHO7DJJDUWHGVAdministrative Law in a
Changing State: Essays in Honour of Mark Aronson+DUW3XEOLVKLQJ2[IRUGDQG:HHNVDERYHQ
118 See Mount Sinai Hospital Center v Quebec (Minister of Health and Social Services)DERYHQRe Minister for Immigration and
Multicultural Affairs; ex parte Lam, above n 58.

The second factor is the precedential effect of a ruling or advance ruling. As noted earlier, in Australia
all rulings are binding on the Commissioner but in the case of public rulings, a taxpayer, if it brings itself
within the terms of the ruling, will be assessed on this basis unless the assessment is challenged. This is the
case irrespective of whether the taxpayer is aware of the ruling. In New Zealand, public rulings are only
binding on the Commissioner.
A third aspect Givati considers is the political considerations as to the choice of policy. Givati suggests
that rules are subject to political criticism as they impact on so many taxpayers whereas adjudication or
advance rulings are not because of their limited scope. In Australia and New Zealand, there is no political
pressure placed on the Commissioner in relation to his interpretation of the law when issuing advance
rulings.
Tax professionals may be highly critical of these rulings, though it would be quite unusual for a politician
WRH[SUHVVDYLHZZLWKUHVSHFWWRDQ\SDUWLFXODUUXOLQJ,WLVLPSRUWDQWWRQRWHWKDWLQWKH$XVWUDOLDQDQG
1HZ=HDODQGFRQWH[WUXOLQJVKDYHWKHIRUFHRITXDVLODZ7D[SD\HUVNQRZWKDWLIWKH\IDOOZLWKLQWKH
terms of a ruling, their liability will not be greater than that described in the ruling.
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EHFRVWHIIHFWLYHWRLVVXHDUXOLQJRUHYHQWRVHWXSDOLFHQVLQJPHFKDQLVP7KH¿QDODVSHFWLVQRQSURFHGXUDO
FRVWV7KHVHDUHWKHFRVWVRIPRQLWRULQJ¿UPVDQGOHDUQLQJDERXWWKHVSHFL¿FFKDUDFWHULVWLFVRIHDFK¿UP
0RQLWRULQJFRVWVDOZD\VKDYHWREHLQFXUUHGHYHQLIWKHDXWKRULW\LVXQDEOHWRPRQLWRUHDFK¿UP7KHUHIRUH
these costs do not affect which policy is adopted. If such conduct is permitted, no monitoring is required
DQGDUXOLQJEHFRPHVPRUHDSSHDOLQJ2EWDLQLQJLQIRUPDWLRQDERXWWKHLQGLYLGXDOFKDUDFWHULVWLFVRI¿UPVLV
PRUHSUREOHPDWLF$GMXGLFDWLRQLVQRWDQRSWLRQDVWKHDXWKRULW\KDVWREHDUWKHFRVWVRIDFTXLULQJVSHFL¿F
NQRZOHGJH DERXW WKH ¿UP 5XOHPDNLQJ DQG OLFHQVLQJ GR QRW VXIIHU IURP WKLV SUREOHP7KHVH ODWWHU WZR
RSWLRQVHLWKHUSHUPLWRUSUHFOXGHFRQGXFWLUUHVSHFWLYHRIWKHLQGLYLGXDOFKDUDFWHULVWLFVRID¿UP
$QDFNQRZOHGJHGDGYDQWDJHRIWKHUXOLQJVSURFHVVLVWKHHDUO\LQIRUPDWLRQÀRZWRWKH5HYHQXH0RUULV
and Lonsdale state in this regard that, “[f]rom an administration perspective, a spinoff of the binding rulings
process is better information to help identify threats to the tax base.”119 An example of a potential failure to
UHFRJQLVHWKLVSRVLWLRQLVGHPRQVWUDWHGWKURXJKWKHVDJDLQYROYLQJWKHPDMRULW\RI1HZ=HDODQG¶VODUJHVW
EDQNVGXULQJWKHODWHVZKHUH,QODQG5HYHQXHKDGLVVXHGDQXPEHURIELQGLQJUXOLQJVRQµUHSR¶W\SH
arrangements and eventually challenged these through protracted litigation, ending in a settlement in late
2009.120
2I FRXUVH WKH LQIRUPDWLRQJDWKHULQJ UROH SRWHQWLDOO\ SOD\HG E\ DGYDQFH WD[ UXOLQJV ZDV LGHQWL¿HG E\
Norman Sugarman in the United States context at the time that advance tax rulings were introduced there
PHQWLRQHGLQVHFWLRQRIWKLVDUWLFOHDERYH7KHXWLOLW\RIKDYLQJHDUO\QRWLFHRIQRYHOWD[SODQQLQJ
119 Tony Morris and Michele Lonsdale “Translating the Compliance Model into Practical Reality” in James Dalton and Beth Kilss
HGV The IRS Research Bulletin: Recent IRS Research on Tax Administration and Compliance 3XEOLFDWLRQ 7UHDVXU\
'HSDUWPHQW:DVKLQJWRQ'&
120 6HH3DWULFN0F&RQQHOO³6\VWHPLFRSHUDWLRQDOULVNVPRNHDQGPLUURUV´-RXUQDORI2SHUDWLRQDO5LVNDW)RXU
RIWKHPDMRUEDQNVKDGEHHQLQYROYHGLQVWUXFWXUHG¿QDQFHDUUDQJHPHQWVWKDWIURPDWD[SHUVSHFWLYHFUHDWHGVLJQL¿FDQWVDYLQJV
EXWZKLFKIURPDQHFRQRPLFSHUVSHFWLYHZHUHORVVPDNLQJ)RUIXUWKHUGLVFXVVLRQVHH$GULDQ6DZ\HU³)LQDQFLDO,QVWLWXWLRQV¶7D[
'LVFORVXUHVDQG'LVFRXUVH$QDO\VLQJ5HFHQW$XVWUDODVLDQ(YLGHQFH´H-RXUQDORI7D[5HVHDUFKDQG$GULDQ6DZ\HU
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Law and Regulation 601.
December 2014 385

strategies also underlies the growing use of mandatory disclosures requirements in a number of jurisdictions,
including the United States.121
5.0 SYNTHESIS: TRADITIONAL LEGAL CONSIDERATIONS AND ECONOMIC

THEORY
Given what has been said above about the traditional legal and policy view of rulings, and the potential
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KDYHWHUPHGWKHWUDGLWLRQDORUFRQYHQWLRQDOYLHZLVWKDWWKHUXOHRIODZWUXVWDQGIDLUQHVVDOOFRQGXFHWR
the view that advance tax rulings ought to be made available to taxpayers. This is due to a fundamental
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consequences associated with their activities. To the extent that broader policy ideas are involved, they most
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up with stern measures only with those taxpayers who are uncooperative.
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between underlying social and economic indicators, as well as the adoption of rulings regimes, is that it is
apparently only in limited circumstances that the strategic considerations facing taxpayers will favour them
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fearful of the deleterious effects of the possibility of a negative precedent that the transactions will be
allowed to pass, resentfully.
On the account presented in section 3, advance tax rulings will only rarely be attractive to taxpayers. They
ZLOOEHDWWUDFWLYHZKHQWKHUXOLQJVDUHELQGLQJDQGWD[SD\HUVHLWKHU
• Have some reason to worry that they might face future additional unexpected tax liability in the absence
RIWKHWD[UXOLQJWKRXJKLWLVGLI¿FXOWWRVHHZK\WKHµELQGLQJQHVV¶RIWKHUXOLQJZRXOGSURWHFWDJDLQVWD
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121 6HH5RFKHOOH/+RGHV³7KH&DVHIRUD'LIIHUHQW.LQGRI'LVFORVXUH5HJLPH´7D[1RWHVDW³0DQGDWRU\

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IRS to discern from the huge amount of data in the return those transactions it may be interested in examining further. Mandatory
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mandatory disclosures are a direct result of the failure to disclose, unrelated to the accuracy of the position on the return. In other
words, mandatory disclosures generally are unrelated to the amount reported, or that should have been reported, on the return.”

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GHOLYHUHGWKURXJKDWD[UXOLQJDQGQRWWKURXJKDQXSIURQWH[SOLFLWVXEVLG\122
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her affairs in a manner that may later attract additional tax liability.
The story from section 4 is that governments should generally promote advance tax rulings in
FLUFXPVWDQFHVLQZKLFKWKH\GRQRWZLVKWRSHUPLWRUWKH\ZLVKWRSURKLELWDFHUWDLQNLQGRIEHKDYLRXULQDOO
FLUFXPVWDQFHVIRUH[DPSOHSURGXFWLYHLQYHVWPHQWWKDWZRXOGEHXQHFRQRPLFDOLQWKDWMXULVGLFWLRQLIWD[HG
DWDKLJKHUUDWHDQGZKHUHWKHQXPEHUVRIWD[SD\HUVDIIHFWHGDUHOLNHO\WRPDNHHVWDEOLVKLQJDOLFHQVLQJ
system impractical.
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LPSRUWDQWDWWKHPLFURWD[SD\HUOHYHOQRUDWWKHPDFURZRUOGGHYHORSPHQWLQGLFDWRUVOHYHODQGEWKH
observation that the vast majority of OECD countries have adopted advance tax ruling regimes. We posit
that there are at least four reasons that countries internationally have gravitated towards offering advance
WD[UXOLQJUHJLPHVHYHQLQWKHOLJKWRIWKHSUHGLFWHGXQSRSXODULW\ZLWKWD[SD\HUVRIVHHNLQJDQDGYDQFHWD[
ruling.
5.1 Potentially Credible Signal of Sound Tax Administration

Can the above stories be brought together in a way that coheres with the observed practice in Australia
and New Zealand? Recall the New Zealand experience from section 2.2.1 above, where efforts to speed up
and streamline rulings processes led recently to more rulings being issued and at greater speed. From the
VHFWLRQSHUVSHFWLYHWKLVZDVUHJDUGHGDVDVLJQL¿FDQWLPSURYHPHQWWRWD[SD\HUVHUYLFHDOWKRXJKLWPLJKW
EHGLI¿FXOWWRLPDJLQHKRZWRH[SODLQZK\WKLVZRXOGEHWKHWD[SD\HUUHVSRQVHLIWKHVWRU\IURPVHFWLRQ
ZHUHDFFXUDWHDQGUXOLQJVDUHW\SLFDOO\QRWLQDWD[SD\HU¶VEHVWLQWHUHVWV7RWKHH[WHQWWKDWWKHVWRU\IURP
VHFWLRQ H[SODLQV ZK\ WD[SD\HUV DUH XQOLNHO\ WR ZDQW WR VHHN UXOLQJV RXWVLGH RI OLPLWHG FLUFXPVWDQFHV
there are reasons to be sceptical of the manner in which the speed of processing and number of rulings has
increased. For example, it is easy to predict an increase in speed of processing if less care is being used to
study potentially unexplored or unanticipated tax consequences of proposed transactions, perhaps by using
less expert tax administrators. Similarly, if less care and diligence is being deployed by tax administrators in
SURGXFLQJUXOLQJVLWLVHDVLHUWRVHHKRZWKHVWUDWHJLFFRQVLGHUDWLRQVWKDWW\SLFDOO\GLVIDYRXUVHHNLQJUXOLQJV
IRUWD[SD\HUVPLJKWFDXVHWD[SD\HUVWREHOHVVFRQ¿GHQWLQVHHNLQJWKHP
Offering taxpayers the opportunity to learn the requirements of the tax law in advance should bolster tax
compliance and tax morale more generally, even if taxpayers are reluctant to use the rulings regimes. From
this perspective, the decision can be at least partly an exercise in tax administration messaging and, more
broadly, perhaps even an exercise in national branding or identity. Nevertheless, in considering matters of
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VXFK DV WKURXJK SUHORGJHPHQW PHHWLQJV DV UHFHQWO\ LQWURGXFHG LQWR WKH 1HZ =HDODQG ELQGLQJ UXOLQJV
regime.
122 Nevertheless, it is important to note that a jurisdiction may not be willing to provide for explicit subsidies based on its approach
to tax policy.
December 2014 387

5.2 The OECD as Exerting Peer Pressure

A second reason is that countries may be responding to subtle peer pressure to come into line with
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By throwing the spotlight on jurisdictions that are not offering advance tax rulings, as well as suggesting
that advance rulings regimes are the best practice, this could subtly encourage tax administrations to adopt
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administration series has encouraged jurisdictions to adopt advance tax rulings regimes.
5.3 Asymmetrical Gains and Losses for the Tax Authorities

Third, why not come into line if it is relatively inexpensive to do so? From this perspective, offering
advance tax rulings is little more than inexpensive window dressing that is part of the cost of being a
PHPEHURIWKH³VRXQG¿VFDOPDQDJHUV´FOXE
5.4 Negative Signal Associated with Eliminating an Advance Tax Ruling Regime
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rulings regime once one is in place. Thus, even if tax administrations expected rulings regimes to be heavily
used and are subsequently underwhelmed by the response by taxpayers, they might well be reluctant to
disband the programmes.
6.0 CONCLUSION
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from the perspective of those who admirably praise the rule of law and principled tax practice by tax
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convergence in international practice in offering advance tax rulings, there is little evidence of convergence
in practices surrounding the decision to charge taxpayers for advance tax rulings. This suggests that there
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it is optimal to charge for the provision of advance tax rulings to taxpayers.
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Section 5 attempts a synthesis of the traditional approach and the comparative practice.123:H¿QGWKDW
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jurisdictions with advance tax rulings have adopted binding rulings practices without a sound underlying
UHDVRQWKDWFDXVHVWKHPWREHUHOHYDQWDQGUHOLHGXSRQE\WD[SD\HUV'HVSLWHWKLVZH¿QGWKDWLWLVGLI¿FXOW
to discern any underlying economic fundamentals that are empirically associated with the adoption of
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GLIIHUHQWUHDVRQVEHKLQGZK\DMXULVGLFWLRQSURYLGHVIRUDGYDQFHUXOLQJVVXFKDVWRVXSSRUWVHOIDVVHVVPHQW
PHHWDGHPDQGIRUUXOLQJVIURPWD[SD\HUVWKDWPD\LQFOXGHSRWHQWLDOO\UHTXLULQJDSSOLFDQWVWRLQFXUVRPH
IRUPRIIHHVDGHVLUHWRHQKDQFHFHUWDLQW\DFRUHSULQFLSOHRIHIIHFWLYHWD[V\VWHPVRUSHUKDSVGXHWRD
perception that advance rulings are a competitive trend that a jurisdiction wishes to match. We suggest that
it could simply be that although advance tax rulings are salutary, their overall economic importance is not
SDUWLFXODUO\SURIRXQGZKHQUHJDUGHGIURPDFURVVFRXQWU\PDFURHFRQRPLFSHUVSHFWLYH
To complement the arguments from theory, we offer some tentative evidence that advance tax rulings
may not be of great consequence economically. Empirical analyses of panel data of rulings practices
published by the OECD do not show any reliable correlations of observed practice with social or economic
IXQGDPHQWDOV7KLV¿QGLQJLVFRQVLVWHQWZLWKWKHSX]]OHSRVHGE\HFRQRPLFWKHRU\ZKLFKVXJJHVWVWKDW
UXOLQJVUHJLPHVDUHQRWOLNHO\WREHSDUWLFXODUO\LPSRUWDQWLQSUDFWLFH,QGHHGZHZRXOGDUJXHWKDWLWLVQRW
XQUHDVRQDEOHWRFODLPWKDWUXOLQJVUHJLPHVKDYHRYHUDOOEHHQDGLVDSSRLQWPHQWZLWKWDNHXSUDWHVIDUORZHU
than many would have predicted. Furthermore, some of the treatises comparing rulings regimes are now out
of print because it is not worth the time and effort to maintain them.
From an optimistic perspective, advance tax rulings are best regarded as serving as expressive function in
VXSSRUWRIWKHUXOHRIODZDQGVRXQGWD[DGPLQLVWUDWLRQDVZHOODVVHOIDVVHVVPHQW/HVVJHQHURXVO\DF\QLF
might be tempted to say that the resolution to the puzzle posed by the incongruence between theory and
practice may be that the best reason to have a binding rulings regime may be because just about everyone
else has one. In terms of a limitation of our research, from an empirical perspective we cannot rule out the
SRVVLELOLW\WKDWWKHUHPD\EHRWKHUYDULDEOHVWKDWZHGLGQRWKDYHDFFHVVWRWKDWPLJKWVLJQL¿FDQWO\FRUUHODWH
with advance rulings.
Accepted for publication on 31 July 2014
123 See, for example, OECD Tax Administration in OECD and Selected Non-OECD Countries: Comparative Information Series
3DULV-DQXDU\
December 2014 389

Advance Tax Rulings in Perspective A The PDF

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Advance Tax Rulings in Perspective:

A Theoretical and Comparative Analysis

BENJAMIN ALARIE, KALMEN DATT, ADRIAN SAWYER AND GREG WEEKS*

362 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

December 2014 363

364 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

2.0 THE CONVENTIONAL LAW AND POLICY APPROACH TO ADVANCE TAX

2.1 The Rule of Law and Tax Law Uncertainty

December 2014 365

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366 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

December 2014 367

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368 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

December 2014 369

2.2.1 Australia and New Zealand

41 United States v Mead Corp866&W  DW

370 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

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December 2014 371

372 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

December 2014 373

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2.2.2 United Kingdom

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374 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

71 At 2629, [1] per Lord Wilson.

December 2014 375

More than the result in DaviesWKLVVSHFL¿FRXWFRPHLVDFDXVHIRUVLJQL¿FDQWFRQFHUQ:KHUHSHRSOH

2.2.3 United States

376 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

2.2.5 Other jurisdictions

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December 2014 377

2.3 Patterns in Adoption of Advance Tax Rulings Regimes

378 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

3.0 WHEN SHOULD TAXPAYERS SEEK ADVANCE TAX RULINGS?

92 See section 2.1 above.

December 2014 379

An earlier contribution by Belz100LGHQWL¿HGDUDQJHRIIDFWRUVWKDWZRXOGEHFRQVLGHUHGE\WD[SD\HUV

380 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

102 See Belz, above n 100.

December 2014 381

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4.0 WHEN SHOULD GOVERNMENTS OFFER ADVANCE TAX RULINGS?

382 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

December 2014 383

WKHJRYHUQPHQW¶VSUREOHPIURPWKHUHYHQXHSHUVSHFWLYHLVWKDWLUUHVSHFWLYHRIWKH ex ante policy approach

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384 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

December 2014 385

5.0 SYNTHESIS: TRADITIONAL LEGAL CONSIDERATIONS AND ECONOMIC

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386 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

5.1 Potentially Credible Signal of Sound Tax Administration

December 2014 387

5.2 The OECD as Exerting Peer Pressure

5.3 Asymmetrical Gains and Losses for the Tax Authorities

388 NEW ZEALAND JOURNAL OF TAXATION LAW AND POLICY — Volume 20

Accepted for publication on 31 July 2014

December 2014 389

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