Abstract
This essay is a reply to the famous paper by John Gardner: Legal Positivism: 5½ Myths and the more recent paper by John Prebble: Kelsen, the Principle of Exclusion of Contradictions, and General Anti-Avoidance Rules. The reply is developed from the perspective of tax law where the respective issues are of major significance. The “5½ problems” correspond to Gardner’s arguments and are as follows: (#1) Legal Positivism centers on determining whether a tax law is “legally valid” based on its source (e.g., the legislature enacted a valid law applying tax at the rate of 25%). However, in the tax context, a second-stage assessment is nearly always necessary to determine whether the scope of the tax law extends to the particular “factual” situation at issue (e.g., the “tax base” includes xyz). The second-stage assessment means deciding a case “on the merits” and encompasses the vast majority of legal inquiry relevant to domestic and international tax practice; (#2) Logical Positivism is often endorsed by Legal Positivists as a method of legal interpretation in the tax context; (#3) Legal Positivism is not normatively “inert” where it is applied as a method of legal interpretation; furthermore, tax and legal practitioners are not committed to “normative” modes of legal analysis in evaluating cases on the merits; (#4) Legal Positivism has been applied to challenge the validity of GAARs on the grounds that formalistic tax avoidance planning by multinational firms is justified by the “rule of law”; (#5) Legal Positivism has been applied to reach a “double non-taxation” outcome based on an overly-broad view of the valid scope of tax treaties; and (#5½) Legal philosophy often lacks practical validity.