Allsop, Justice James --- "Advocacy in tax cases: A view from the bench" (FCA) [2022] FedJSchol 6

The place, the wholeness and the relational reality to words; it helps to prevent linear thinking and sometimes beguilingly simple and attractive logic with words driving meaning to unrealistic and impractical ends; and it helps ascribe meaning conformable with commonsense and convenient purpose gained from the relevant part of the statute as a whole aEUR| (Chevron at [3]).

It is, however, important that tax advocates adopt an appropriate frame of reference in using context and purpose for tax legislation. While statutory construction requires aEURoereference to the language of the instrument viewed as a wholeaEUR (Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297 at 320), often little, if any assistance, can be gained from reference to the broad social policies embedded in tax legislation, such as a statement that the object of the ITAA 1997 is to raise tax. While this is obvious, it does little to assist the task of statutory construction in an Act the size of the ITAA 1997 which applies to a myriad of different people, places and circumstances. The fact that the overarching purpose of the ITAA 1997 is to raise tax does not mean that beneficial constructions in favour of the Commissioner should be adopted or sought. As the Honourable Murray Gleeson AC has remarked, the income tax legislation raises revenue for government aEURoenot by all means possible but in accordance with a detailed and complex plan of fiscal policyaEUR. Nor does the fact that the ITAA 1997 interferes with the rights to property of citizens require a narrow construction in favour of taxpayers. Chief Justice BarwickaEURtms statement in Federal Commissioner of Taxation v Westraders Pty Ltd [1980] HCA 24; (1980) 144 CLR 55 at 59 that the Parliament must specify an obligation on the party of a citizen to pay tax with aEURoeunambiguous clarityaEUR no longer holds the same force in modern jurisprudence.

A much more nuanced approach to purpose and context is required.

In highly taxonimised statutes which are closely structured and finely worded, the room for interpretation from broad expressions of purpose is narrow: Joffe v R [2012] NSWCCA 277; (2012) 82 NSWLR 510 at 518 [36]. The text used becomes paramount. As Learned Hand J said in Helvering v Gregory [1935] USSC 5; 69 F2d 809 at 810 (2nd Cir 1934): aEURoeas the articulation of a statute increases, the room for interpretation must contractaEUR. But that does not mean context and purpose becomes unimportant. Judge Hand continued in Helvering v Gregory: aEURoeThe meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively createaEUR. See also Quikfund (Australia) Pty Ltd v Airmark Consolidators Pty Ltd [2014] FCAFC 70; (2014) 222 FCR 13 at 30 [75] and Snedden v Minister for Justice [2014] FCAFC 156; (2014) 230 FCR 82 at 100 [99].

Instead, in legislation which may pursue competing and inconsistent purposes, the search for meaning will require closer attention to the particular purpose and policy of a section, division or part in which the words appear: see Channel Pastoral Holdings Pty Ltd v Commissioner of Taxation [2015] FCAFC 57; (2015) 232 FCR 162 at 165 [6]. This approach will more appropriately situate the text within the aEURoefiscal and commercial contextaEUR or the aEURoecomplex plan of fiscal policyaEUR to which it seeks to address.

Statutory construction is not a textual game, to be played on a game board with moving pieces made of words. Logic and meaning are sometimes complementary, but logic does not drive meaning by moving individual words as building blocks.

Increasingly, Commonwealth drafters (including the drafters of the ITAA 1997) employ sections at the commencement of Parts, Divisions and Sub-Divisions which provide a aEURoeguideaEUR to its intended operation. Often this aEURoeguideaEUR will explain the purpose of and provide a summary of the provisions contained therein. As I explained in the Bay Street Appeal at [13], these guides aEURoecan be taken as express statutory aids to construction giving aEUR~practical contentaEURtm to words of generality or abstraction in the PartaEUR, citing Russo v Aiello [2003] HCA 53; 215 CLR 643 at 645 [5] (Gleeson CJ). Their use in Commonwealth statutes more broadly should be encouraged. That is not to say that one should lose focus of the context and purpose of the Act as a whole. Rather, such guides form an integral part of seeking to ascribe meaning to words, and therefore provisions, within the statute that reflect the purpose for which they were enacted.

That is not to say that broader context is irrelevant. This is exemplified by Commissioner of Taxation v Shell Energy Holdings Australia Limited [2022] FCAFC 2. In that case, the Full Court considered the proper construction of s 40-80(1) of the ITAA 1997, which provided that the decline in value of a depreciating asset that a taxpayer holds is the assetaEURtms cost, if the taxpayer aEURoefirst usesaEUR the asset aEURoefor explorationaEUR. In construing aEURoefor explorationaEUR, emphasis was given to the important commercial and sovereign context concerning the exploration for and exploitation of natural resources, namely oil, that militated against any narrow construction of the words aEURoeexploreaEUR and aEURoeexploitaEUR (at [3]). Justice Davies conducted a detailed review of the statutory history, including its international law context and its part amongst a cohesive natural regulatory scheme governing offshore activities, to find that there was nothing to suggest that Parliament intended that aEURoeexploration for petroleumaEUR should be limited to discovery of petroleum and not include activities directed to investigating the commercial recoverability of petroleum. Without reference to this context and purpose, a purely textual analysis involved a fraught choice between competing dictionary definitions of words.

Resort to dictionary definitions of words can be problematic when devoid of context. Despite common perception, dictionaries do not provide authoritative definitions of words, they merely provide approximate meaning of words or a range of possible meanings. As Spigelman CJ has remarked, aEURoe[j]udges no longer approach a statute with scissors in one hand and a dictionary in the otheraEUR (Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 83; (2009) 78 NSWLR 43 at [88]). The High Court in Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664 at [23] has affirmed Learned Hand J statements in Cabell v Markham (1945) 148 F 2d 737 at 739 aEURoeit is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaningaEUR. Therefore, while dictionary definitions may be of assistance, often they provide little more than confirmation that the constructions contended by either party fall within the range of acceptable meanings. As noted above, this was the case in Shell aEUR" see [30]-[31].

With this misapprehension as to textualism in mind, I dissuade you from seeking to play word games with text. Any interpretation of the text of the tax legislation needs to be run by the fire of practicality, common sense and evident purpose. Any problem of statutory construction needs to be looked at from the perspective of: Well, really? Did I just turn water into wine? If it appears so, there may be something amiss.

Reference materials

G T Pagone, Tax Disputes (The Federation Press, 2018), Ch 9

AM Gleeson, Statutory Interpretation (Justice Hill Memorial Lecture, 24^th National Convention, Taxation Institute of Australia, 2009)

Mark Burton, aEUR~The Rhetoric of Tax Interpretation aEUR" Where Talking the Talk is not Walking the WalkaEURtm (2005) 1(3) Journal of the Australasian Tax Teachers Association 1