Justice Hill and the autopoiesis of income tax law

The theory that law may best be understood as an autopoietic system has gained considerable ground since Luhmann advanced it in 1981. Nevertheless, there have been few endeavours to apply the theory in any practical way or to employ it to analyze particular areas of law. In Autopoiesis and General Anti-Avoidance Rules (2010) 21 Critical Perspectives on Accounting, 545, Geraldine Hikaka and the present author proposed the thesis that Luhmann s theories usefully illuminate the field of income tax law. The present article illustrates this thesis by analyzing a leading case from each of the Privy Council and the High Court of Australia, namely Europa Oil (NZ) Ltd v Commissioner of Inland Revenue and Federal Commissioner of Taxation v South Australian Battery Makers Pty Ltd. The article argues that the autopoietic nature of income tax law presents challenges to the judicial process that, as these cases illustrate, lead to income tax law becoming detached from the business profits that are an important part of its subject matter. The article then turns to Macquarie Finance Ltd v Federal Commissioner of Taxation, one of the last tax judgments of the late Justice Graham Hill. The author argues that in Macquarie Finance Ltd Justice Hill demonstrated a rare, almost unique, ability among judges: to reconcile the formalistic, autopoietic nature of tax law with the business substance that was the subject matter of the case. The article turns first, however, to the question of what is meant by the autopoietic theory of law.