Application of choice doctrine: the lessons learnt from Trinity

Lal, Aradhana
Ohms, Christopher
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Master of Business
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Auckland University of Technology

In this dissertation the author discusses the complexities involved in applying the doctrine of choice. The rationale behind its existence appears to be a good one – it is a judicial tool used to provide the balance between legitimate tax mitigation and illegal tax avoidance. The concept behind this doctrine is that it provides the taxpayers with some guidelines as to when a transaction will or will not be caught under the tax avoidance rules. Although theoretically choice doctrine was created to provide taxpayers some relief and certainty from the apparently harsh tax avoidance rules, the practical application of the doctrine is considerably uncertain because of the nature of its existence.

The problematic aspect of this doctrine is that it is not legislated. It is a creature of statutory interpretation and its application lies in understanding the scheme and purpose of a particular provision. In this dissertation the author discusses the issues facing the application of the choice doctrine. It is important to understand when choice doctrine should be applied. Furthermore, it is essential to understand how this principle is applied in New Zealand. In recent cases, the judges have applied this doctrine and the tax avoidance rules quite differently to what is considered the ‘traditional legal approach’. The author intends to expound upon the effect and consequence of the current judicial approach towards the legal methodology used in the application of the tax avoidance rules and the choice principle.

Tax mitigation , Income tax , Statutory interpretation rules , Antecedent transaction doctrine , Doctrine of new source
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