- 2017 Annual Volume, Volume 45

5 1/2 Problems with Legal Positivism and Tax Law

Essay by: Bret N. Bogenschneider

2017 PEPP. L. REV. 1 (2017)

This essay is a reply to the famous paper by John Gardner, Legal Positivism: 5 1⁄2 Myths, and the more recent paper by John Prebble, Kelsen, the Principle of Exclusion of Contradictions, and General Anti-Avoidance Rules. The reply is developed from the perspective of tax law where the respective issues are of major significance. The “5 1⁄2 problems” correspond to Gardner’s arguments and are as follows: (#1) Legal Positivism centers on determining whether a tax law is legally valid based on its source (e.g., the legislature enacted a valid law applying tax at the rate of 25%). However, in the tax context, a second-stage assessment is nearly always necessary to determine whether the scope of the tax law extends to the particular fac- tual situation at issue (e.g., the tax base includes xyz). The second-stage assessment means deciding a case on the merits and encompasses the vast majority of legal inquiry relevant to domestic and international tax practice; (#2) Logical Positivism is often endorsed by Legal Positivists as a method of legal interpretation in the tax context; (#3) Legal Positivism is not normatively inert where it is applied as a method of legal interpretation; further- more, tax and legal practitioners are not committed to normative modes of legal analysis in evaluating cases on the merits; (#4) Legal Positivism has been applied to challenge the validity of General Anti-Avoidance Rules (GAARs) on the grounds that formalistic tax avoidance planning by multinational firms is justified by the rule of law; (#5) Legal Positivism has been applied to reach a “double non-taxation” outcome based on an overly-broad view of the valid scope of tax treaties; and (#5 1⁄2) legal philosophy of- ten lacks practical validity.

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