The Gazette 1976

GAZETTE

instances which he wishes to cover. He frames a formula which he hopes will embrace them all with precision. But the formula is as unintelligible as a mathematical formula to anyone except the experts : and even they have to know what the symbols mean. To make it intelligible, you must know the sort of thing Parliament had in mind. So you have to resort to particular in- stances to gather the meaning." Far be it from me to suggest or infer that the Wealth Tax Act 1975 is unintelligible at any stage, but there are several areas in the Act which introduce new con- cepts in taxation law. Mr. Johnston by means of apt illustrations explains these and emphasises the necessity for such concepts in the Act For this both Revenue and taxpayer will be graceful. The scope of the Wealth Tax Act as regards the first assessable person, the individual, is governed by two criteria, domicile and ordinary residence. Domicile is so largely a matter of intention that it could be difficult for the Revenue to rebut a statement by a living individual that his in- tention was to leave the country permanently. The anti- avoidance provision of deemed domicile is therefore in- troduced in the Act as a counter to fictitious claims of change of domicile. The relevant provisions of Section 3(5) appear rather daunting at first sight. The author correctly po'nts out however, again by way of example, that a case of genuine change of domicile will not be adversely affected. In such a case of genuine change of domicile, the second criterion of ordinary residence will almost certainly not be present. One of the most impressive chapters in the book is, in my opinion, the chapter on discretionary trusts. This is an area where legal expertise is a sine qua non and where the author is therefore at his best. The discre- tionary trust, as defined in Section 1 of the Act, is treated, as we know, as an assessable person and the property comprised therein is regarded as the taxable wealth of the trust No benefit of threshold is available and the reliefs and exemptions granted to the individual are also excluded. In view of the central theme of the Act. which is to tax wealth in possession only it is obvious that the discretionary trust could not be treated in any other fashion. Regardless of pleas to the contrarv, I think most will agree that the discretionary trust was created in very many cases as a tax avoidance vehicle. This being so, any legislation taxing discretionary trusts would tend to be of an anti-avoidance nature. It is also true to say that most anti-avoidance legislation which is drafted of necessity in wide terms, will at times cover bona fide areas and cause undue hardship. No doubt it is for this reason that the draftsman included the relieving provisions in Sections 5(2) and 5(3) of the Act. These provisions are intended to cover situations where discretionary trusts were set up for reasons other than tax-avoidance. While the author makes a reasoned plea for single object discretionary trusts, it seems likely that the overriding consideration which guided the draftsman was the existence of avoidance possibilities. This factor presumably also explains why the scope of Section 5(2) is not extended to include "issue" instead of "children". Speaking of trusts brings us to limited interests in the context of the Act—again very much a legal area. The Act in fact deems the owner of the limited interest to be beneficially entitled in possession to each item of the underlying property just as if it was his absolute pro- perty This point is emphasised several times in the book and the topic of settled property is dealt with com- prehensively in Chapter 6 with the author again resort- ing to examples to drive home the principles.

BOOK REVIEWS

Johnston, Robert W. R., B.A., LL.B. — Wealth Tax. Dublin: The Incorporated Law Society QÍ Ireland, 1976. xiv, 136p. 25cms. £5.00 The wealth tax legislation, which is one of the three new capital taxes foreshadowed in the White Paper of February 1974, must have been the most controversial taxing statute ever to pass through the Oireachtas and the longest in terms of time spent on debate. It is a novel tax in many ways, not least because it is an annual tax on capital. Furthermore it was not subject to either the benefits or the drawbacks of any common law precedent Early and informed commentary on the new legislation was therefore highly desirable for all con- cerned. We are indeed fortunate that Mr. Robert Johnston's book has provided this in good measure. At first sight, an annunal tax on capital at a flat rate of 1 % appears to involve merely a simple valuation exercise. Certainly, valuation is a very important factor in this tax and the author wisely devotes a lengthy chapter to this one topic. However, when one con- siders how the ownership of wealth is so inextricably linked with the law of property, trusts and settlements, it becomes quickly apparent, that this is a tax, where the guidance of the legal practitioner is of vital impor- tance for the taxpayer, and where his advice will be or ought to be sought. It is very fitting therefore that this text-book should be written by a practising solicitor of the standing of Mr. Jobnstort. The layout of the book follows the customary format of all text-books on taxation beginning with the usual but highly important topic of the interpretation of the taxing statute. This is an area which should be digested at regular intervals by practitioners—not to mention students. It will enable them more easily to apply to particular problems, the fundamental principles (mostly comprised in judicial dicta) which are regarded as governing taxing statutes. The paramount position of the grammatical interpretation for instance or where the onus of proof lies are areas which spring to mind as be ; ng of vital importance in considering any taxation problem The basic elements of every taxing statute are un- changing though understandably each particular statute will have its own variations. The taxing statute charges a tax in a given area on certain property, designates the taxpayer, restricts or enlarges the scope of the general charge to fit particular circumstances, provides exemp- tions and reliefs and finally instals the general mechanics for proper administration of the tax not least of which are the sanctions for non-compliance. Mr. Johnston treats each of these different aspects in a clear and concise fashion, at times with a highly relaxing and narrative style, while at the same time never straying far from the text of the Act. I am reminded here of the dictum of Lord Denning in the Stamp duty case of Escoigne Properties Ltd. v. I.R.C. (1958) 2 W.L.R. part of which reads as follows : . . One of the best ways I find of understanding a statute is to take some specific instances which by com- mon consent are intended to be covered by it. This is especially the case with a Finance Act. I often cannot understand it by simply reading it through. But when an instance is given, it becomes plain. I can say at once 'Yes, that is the sort of thing Parliament intended to cover'. The reason is not far to seek. When the drafts- man is drawing the Act, he has in mind particular

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