In many States, there are no specific standards for the drafting of Tax legislation. The State is free to draft whatever legislation it sees fit and in whatever way it is traditionally done. This, however, can undermine the fairness of the Tax system, and the respect that Taxpayers and Tax Advisors have for the system. Accordingly, certain minimum standards should be applicable to the drafting of Tax legislation. Article 17 lays out these standards.
- Tax legislation shall be written in clear and unambiguous language such that a Taxpayer without specialized professional knowledge shall be able to understand the general provisions of the Tax law with reasonable time, effort and study except for areas that would reasonably require specialized knowledge.
Tax legislation shall be written in clear and unambiguous language, as it is important that Taxpayers understand the legislation and are able to manage their Tax affairs with certainty. Further, having a legislation that is clear and unambiguous is important in perceiving the Tax system as being fair and having integrity. The standard is to be that a Taxpayer without specialized professional knowledge shall be able to understand the law provided the Taxpayer spends reasonable time, effort and study in this endeavour. This is an overriding principle, which should be enforced, and may require that certain Tax legislation be rewritten. Extensive cross-referencing, use of double negatives, exceptions to exceptions, and legislation which is scattered throughout the statute all contribute to the complexity of the legislation, leading to the inability of Taxpayers to understand the legislation. Frequent change compounds the problem. The use of forms, guides, interpretations and other resources provided by the Tax Administration on a timely basis are useful, but are not sufficient as a substitute for legislation which is written clearly and unambiguously. However, this does not apply as a standard for specialized areas, such as corporate reorganizations, or specialized industries, such as banking or mining. Nevertheless, Taxpayers are responsible for complying with the law and seeking assistance when necessary.
- Legislation shall not permit interest or a penalty to be levied if it is not reasonably possible for a Taxpayer acting diligently to comply with the legislation without incurring such interest or a penalty.
Taxpayers should be reasonably able to comply with legislation without incurring interest or a penalty, because otherwise the fairness of the Tax system is fundamentally undermined. If it is not reasonably possible for a Taxpayer to comply with Tax legislation without incurring interest or a penalty, then the legislation is badly conceived. This puts a high onus on the State in the drafting of legislation which is appropriate. With the sovereign right to levy Tax comes the responsibility to do it properly.
- Legislation shall be introduced only through the due process of law, and shall not be effective until the legislation is enacted into law but may apply from the date of announcement if substantially unaltered.
For the integrity of the Tax system, legislation shall be introduced only through the due process of law, and shall not be effective until the legislation is enacted into law. Because of this, legislation shall not be applied until it is passed into law. Thus administrative announcements by the Tax Administration about proposed law cannot carry the force of law and are of no legal effect. Further provisions apply under Article 18 with respect to retroactivity of legislation.
- If the legislation has the effect of levying additional Tax through an increase in the base for taxation, an increase in the Tax rate, or the reduction or denial of deductions the revenue projected to be raised shall be disclosed with the legislation.
When new legislation is introduced, a reasonable estimate shall be given of the additional Tax revenue to be raised or the revenue to be relieved from the legislation. It is the responsibility of the State to provide an estimate of Tax revenues along with the legislation which is to be enacted. This is important in demonstrating accountability and integrity within the Tax system.
- Where Tax legislation makes reference to other laws, those laws shall be referred to in the Tax legislation with sufficient particulars to enable an understanding of their general content and not merely incorporated by cross-reference.
Where legislation makes reference to other laws, those laws shall be summarized in some fashion in the Tax legislation. They shall not be incorporated merely by cross-reference. Otherwise, it becomes difficult for a Taxpayer to understand the Tax legislation without extensive research into these other laws, thereby undermining the principles of certainty and efficiency. While this may contribute to the length of the Tax legislation, this is viewed as being worthwhile when compared to the alternatives. A Taxpayer, though, must still take reasonable measures to comply with the law, seeking assistance when necessary.
- Where Tax legislation is to be interpreted in accordance with its underlying policy that policy shall be written in the Tax legislation in clear and unambiguous language even if such seems superfluous.
Where Tax legislation is to be interpreted in accordance with its underlying policy, that policy shall be written in clear and unambiguous language in the legislation itself. It shall not be reproduced in notes, committee discussions, interpretations which may accompany the Tax legislation, or headings. Tax legislation is often changed as it works its way through the legislative process, and accordingly the underlying policy may be altered from what was originally intended. In any event, it is normally only the legislation which has the force of law. Reference shall especially be made in Tax avoidance legislation to the underlying Tax policy. It is of benefit to both the State and to Taxpayers for the Tax policy to be clearly understood in the context, especially of Tax avoidance, as this provides Taxpayers with greater clarity in complying with their Tax responsibilities and helps promote the fairness of the Tax system. Note that the burden of proof for interpreting Tax legislation should rest upon the State with respect to anti-avoidance legislation, where a Taxpayer is considered to have entered into an avoidance type transaction which is contrary to the policy of the legislation.
- Provisions of Tax law which are no longer of relevance shall be removed from the Tax legislation.
Tax laws which are no longer of relevance shall be removed from the Tax legislation. These are generally referred to as "deadwood provisions". This enhances the readability of the Tax legislation, and shortens the legislation itself. It reduces complexity in the legislation and renders the Tax system more efficient and effective.
- Tax legislation shall be ordered in an organized and logical manner, such that a subject may be viewed in a reasonably accessible way and to the extent that other provisions are applicable, these shall be cross-referenced to aid in understanding the legislation.
Tax legislation shall be drafted in an organized manner. Laws which deal with a particular matter shall be contained in the same general area of the Tax legislation. Where this is not practical, there should be cross-referencing to aid in the understanding of the legislation. Otherwise, the Taxpayer reading the legislation may be unaware of a provision which may be applicable in a different area of the legislation and, taken to an extreme, would need to read and understand it to be sure of the rules. This would not adhere to the Taxpayer's right to an efficient and effective Tax system and would make complying with the law a difficult task.