| This dissertation critically reviews the minimalist role that the concept of economic substance has been given by the Supreme Court of Canada in tax avoidance cases, and compares it with the significant role that economic realities/substance and commercial realities play in the Court's decisions in non-tax cases. In a tax avoidance context, in both the pre and post-GAAR eras, the Court has held that economic substance has a very limited role. In the Court's first GAAR decision in the Canada Trustco case, it held that a lack of substance has no meaning in isolation from the proper interpretation of specific provisions of the Income Tax Act . This position is at odds with the state of the law in the United States, which now has a codified economic substance doctrine, and with the role of economic substance under the GAARs in Australia, New Zealand and South Africa. It also contrasts with the role economic substance has in tax avoidance cases decided by the European Court of Justice, and with the role it has in the proposed UK GAAR. In all of these other jurisdictions, the concept of economic substance is accepted as, and is front and centre amongst, the factual indicators of abusive tax avoidance which undermines the tax system.;It is argued that the Supreme Court's reasons for restricting the role of economic substance, which centre around a stated necessity for deference to Parliament in tax avoidance matters; the preservation of certainty and predictability for taxpayers; and, a right of taxpayers to minimize taxes in accordance with the House of Lords decision in the 1930s in the Duke of Westminster case, do not adequately address the full panoply of pertinent considerations. These include the necessity for the judiciary to determine whether Parliament intended that tax benefits should be available in respect of transactions which have specifically been engineered for no purpose other than to secure tax benefits; the importance of certainty and predictability relative to the tax policy goal that all taxpayers should bear a fair and proportionate share of the tax burden, as opposed to being "free riders"; and, the deleterious effects of tax avoidance on the tax system. |
