Autopoiesis and general anti-avoidance rules

Abstract

Abstract Legal autopoiesis is a post-modern, essentially positivist theory that tries to describe the true nature of law. Its principal tenets are the ideas of self-reproductive growth from reasoning that is self-referential and recursive, relative autonomy from, and “operative closure” against, other social systems, together with “cognitive openness” to “irritation” and to “noise” from outside the closed circle of the law. The authors are sceptical about the ability of autopoiesis theory to illuminate the nature of law in general, but see it as shedding useful light on income tax law, particularly the quality that income tax law shows in inventing legal structures that have no reality beyond the world of fiscal affairs. The authors argue that the general anti-avoidance rule punctures the autonomy and closure of income tax law, to allow the substantive norms of the economic and business system free play, or relatively free play, within tax cases. That is, while income tax law is in general a good example of legal autopoiesis, this observation is incorrect when a general anti-avoidance rule is in play. Two implications for accounting are (a) that the operative closure of law results in a disconnection between income tax law and accountancy, and (b) that a general anti-avoidance rule may repair this disconnection in cases where accountancy records are governed by substance rather than form.