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Power or Control in Relation to Companies

24.A73. The Committee has recommended that, where a person has power under an agreement or an instrument to acquire property for himself and fails to do so, he ought to be taxed as if he had acquired the property. Such a principle might be thought applicable to the power or control that a taxpayer may have over a company and thus over its assets. The nature of a company is such that its affairs can be controlled in many different ways. The problem is to identify what should be regarded as control for present purposes. It may be possible to spell out in legislation what constitutes control in a particular situation, but taxpayers will no doubt then organise their


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affairs so that they do not appear to have such ‘control’. While it is one matter—often very simple—to recognise the situation in which control of the affairs of a company is effectively held by a taxpayer, it is another matter to describe all such situations in general terms.

24.A74. In any case, it may be questioned whether the control of a company is an appropriate basis for the imposition of a tax any more than the control, for example, that attends the office of a trustee. The mere enjoyment of a power to do or refrain from doing some act is not an appropriate basis. To find any such basis one must look to the benefits that could have been obtained by the taxpayer. This raises its own problems which must now be considered.

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