Ahead by a Century: Tim Edgar, Machine-Learning and the Future of Anti-Avoidance

Abstract

The contributions by Professor Tim Edgar (1960-2016) to our understanding of tax avoidance and anti-avoidance remain ahead of their time. In this essay, which I dedicate to his memory, I argue that in his academic work on building better general anti-avoidance rules (GAARs), Edgar was “ahead by a century.” This essay contends that Edgar was right in his claim that tax avoidance can and should be put out of existence through effective anti-avoidance measures. In his most prominent article on the subject of tax avoidance and GAARs, Edgar asserted that “tax avoidance should be viewed as a negative externality, and externality theory suggests appropriate policy instruments that can be used to eliminate the consequential attributes of avoidance behavior.” Later in the same article he took the same point further, stating that, “The consequential attributes of all tax-avoidance behavior require a response of some sort intended to eliminate such behavior.” Although I argue in this essay that Edgar’s position and vision will eventually be realized, the twist in this is that Edgar himself did not anticipate the manner in which his views will be vindicated; probably no one could, except perhaps at a high level of abstraction. Conducting this visioning exercise at a high level of abstraction to foretell where the path of tax law leads with respect to GAARs and anti-avoidance is the project of this essay. The essay proceeds as follows. Part 2 presents the first claim: that law is incomplete and that this is a problem for insisting on the immediate adoption of strict anti-avoidance measures. In the process it explains how and why the stage of legal development that we have reached today falls significantly short of completely specifying the law, including tax law. Part 3 presents the second claim, which is that we are going to unlock considerably more sophisticated and effective approaches to legal development over the coming decades. In the process, I describe at a high level of abstraction some of the mechanisms through which our tax systems are moving towards a ‘legal singularity’ — a state of the law that is functionally complete and well-specified. Part 4 presents the implications of these two claims for the future of GAARs and anti-avoidance. More specifically, I explain how the realization of much more complete law will leave effectively no scope left for tax avoidance, rendering tax law well-targeted and well-equipped to address tax avoidance, in the asymptotic realization of Edgar’s work and vision. Part 5 concludes.