Tax authorities have the authority to disregard the legal structure of an arrangement and instead focus on its true essence. This is known as the substance over form doctrine and is used to prevent the exploitation of artificial structures for the purpose of tax avoidance. It is a crucial concept in the realm of finance and taxation, as it ensures that the true intentions behind a transaction are not masked by its legal form. This allows for a fair and accurate assessment of taxes owed and promotes transparency in financial dealings.