Tax Ethics in the Rashba’s Responsa to Saragossa

Abstract

Rashba’s responsum III:406 relates to a dispute between the Saragossa Jewish community and taxpayer Reuven, whose daughter married an out-towner within the city but then subsequently emigrated without paying the exit tax. The community, which had enacted an ordinance to tax dowries of offspring who exit the city, sought to recover an exit tax. The taxpayer (Reuven) argued that the technical language of the ordinance applied only if the wedding took place outside of the city and exempts weddings that took place in the city even if the newlyweds later departed. We derive three lessons on tax ethics and policy from the Rashba’s responsum. First, the tax code should be applied based on its spirit, as determined by the application of precedence, not by an exact technical reading of its language. Second, a taxpayer is blameless for taking advantage of a valid loophole, even if the application of the loophole does not conform with the intent of the tax code. Third, a taxpayer is blameless when another party to a transaction engages in inappropriate tax evasion. This is the case even if the structure of the transaction contributed to the evasion. We show that similar conclusions were reached by U.S. Judge Learned Hand seven centuries after the Rashba.