The Association Between Fairness and Judicial Decision-Making Evidence from Tax Law

Abstract

Empirical literature on judicial decision-making has not yet considered the association between the normative value of fairness and
judges’ decisions. Using a sample of tax cases at the Tax Court of Canada (2010–2019) containing 4,420 disputes, we investigate whether a litigant is significantly more likely to obtain a favorable outcome if there is a reference to fairness in the court judgment. Compared to disputes without a mention of fairness in the court judgment, disputes with any mention of fairness have a 51% greater likelihood of a successful outcome. Notably, even when a court judgment mentions fairness not clearly in favor of the taxpayer, taxpayers are still 28% more likely to obtain a successful outcome than taxpayers without a mention of fairness. Together, these findings show that fairness is strongly associated with judicial outcomes and suggest that fairness considerations may influence judges. Furthermore, analysis of the subsample with fairness references reveals that two dimensions of fairness significantly
and positively affect the likelihood of a taxpayer winning a tax dispute (procedural fairness and interpretive fairness), and one dimension of fairness significantly and negatively affects the likelihood of a taxpayer winning a tax dispute (outcome fairness). These results show the contextual and normative importance of fairness.