Tax Conference – Cases hang in judges’ balance

Companies taking tax cases to court are entering a lottery in which the outcome will often depend of the prejudices of the judge, a leading barrister said last week.

Speaking at the English ICA taxation conference, Michael Flesch QC, said: ‘All tax litigation is pure lottery. The outcome of tax cases is impossible to predict. Tax and tax avoidance is an area where everyone has their own prejudices, and judges are not immune from this.’ He argued that judicial uncertainty made the task of the tax practitioner very difficult.

Flesch, until recently chairman of the Revenue Bar Association, said the idea that barristers could predict the outcome of a case was something of a myth, especially when it came to tax. He backed up his views by giving examples of recent cases in which contradictory decisions had been made, and said the uncertainty of the system was illustrated by the number of cases that had been reversed on appeal.

The Ramsay principle, used in a long series of court cases to determine the nature of tax avoidance, also came under fire.

Flesch quoted a High Court judge, who said earlier this year: ‘The Ramsay principle seems to verging on making liability to tax subject to judicial discretion rather than the rules of law.’

He added: ‘One man’s tax avoidance is another man’s tax mitigation. Avoidance is very much in the eye of the beholder.’

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