Tax Avoidance Guide
Tax avoidance and tax planning both involve tax reduction arrangements that may meet the specific wording of the relevant legislation.
Tax Avoidance Guide
Tax avoidance and tax planning both involve tax reduction arrangements that may meet the specific wording of the relevant legislation. Effective tax planning occurs when the results of these arrangements are consistent with the intent of the law. When tax planning reduces taxes in a way that is inconsistent with the overall spirit of the law, the arrangements are referred to as tax avoidance. The Canada Revenue Agency’s interpretation of “tax avoidance” includes all unacceptable and abusive tax planning. Aggressive tax planning refers to arrangements that “push the limits” of acceptable tax planning.
Tax avoidance occurs when a person undertakes transactions that contravene specific anti-avoidance provisions. Tax avoidance also includes situations where a person reduces or eliminates tax through a transaction or a series of transactions that comply with the letter of the law but violate the spirit and intent of the law. In 1988 to address these latter situations, the general anti-avoidance rule was enacted.