Evasion (law)

In law, the Doctrine of Evasion is a fundamental public policy. Whereas a person may legitimately plan affairs so as to avoid the incidence of obligations or liabilities imposed by the law, no one is allowed to evade the operation of otherwise mandatory provisions once duties and liabilities have been properly imposed or incurred. It is also a common principle in conflict of laws.

This is a standard doctrine in most jurisdictions: in France, it is termed, fraude à la loi, in Spain, fraude de ley, in Italy, violazione di norme di legge, in Germany, Rechtswidrige Umgehung eines Gesetzes. It reflects the need for governments to prevent their citizens from intentionally and improperly manipulating their behaviour to prevent mandatory provisions in the law from applying to them. As the translated names necessarily imply, the key is an intention to displace the normal operation of the legal system. Sometimes, this intention will be express. On other occasions, it will be for the courts to decide whether a sufficient intention can be imputed. Once the intention is established, the evasive manoeuvre will be void and the normal legal provisions will apply to the parties.

Almost all states operate a collection system for taxation revenues within a framework of law, and enforced through independent courts. Enabling statutes must be strictly applied, and it is generally against public policy to allow the tax administration to agree to reduce the amount of tax payable by any one individual. Like criminal law where agreements by the policing authorities to exempt a criminal are prohibited, tax law has a special status as being essential to an organised society in maintaining public trust through the policy of equal treatment in the legal system. Nevertheless, if a tax payer organises his or her affairs so as to exploit a loophole in the law and avoid the incidence of tax liability, this will usually be permitted. It is not for the courts to legislate and plug the gaps left by the legislature. The test of avoidance will be whether there is a legitimate purpose for the given behaviour. Many states adopt a "business purpose" test, decomposing the transaction into its component steps to determine the true purpose of the transaction(s) (see tax avoidance/evasion).

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