What is Tax Avoidance?
This term implies that a taxpayer has arranged his affairs in such a way either that his tax burden is less than it would otherwise have been or that no tax is payable as a result of such arrangement. The term is generally employed so as to indicate that the taxpayer has acted in a lawful manner and differs fundamentally in this regard from the concept of “tax evasion” which is illegal.
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 the term “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. It was to address these latter situations that the genera
