A pan-European GAAR? Some (un)expected consequences of the proposed EU Tax Avoidance Directive combined with the Dzodzi line of cases (original) (raw)

IFA Cahiers de droit fiscal international, Volume 103A, 2018

The questions surrounding the concept of tax avoidance as well as the targeted efforts against it are multiple and challenging to respond to, and this Report has shown the levels and scope of anti-avoidance considerations in the EU tax area. From a policy perspective, a clear under-standing of the meaning and scope of tax avoidance is necessary for the design of appropriate counter-measures, which are also relevant for the future of international taxation, economic growth and welfare. The OECD and the EU describe targeted tax avoidance or so-called “ag-gressive tax planning” as a conduct that (1) leads to minimization/reduction of tax liability, (2) through unreasonably broad interpretation of tax laws or exploitation of mismatches in the in-ternational tax framework, (3) without infringing the (letter) of the law. 194 Indeed, as evidenced in the national reports, national and international legislatures are employing a number of de-fenses against this type of tax planning. In addition, to some more specific anti-abuse clauses in the company tax Directives, the EU recently opted for a GAAR in its Anti-Tax-Avoidance Directive (ATAD), targeting arrangements with the main purpose to obtain a tax advantage, that are not genuine as to economic sub-stance and that defeat object or purpose of the applicable tax law. Similar concepts are found in the domestic laws of many Member States, making reference to the broader concept of abuse of law.195 Thus, where form does not reflect substance, an arrangement or transaction may be re-characterized or ignored. At international level, the OECD Model Commentary now includes general rules to address treaty shopping, among them a “Principal Purpose Test” (PPT) and a “Limitation-on-Benefits”-Provision (LoB).196 Specifically with regard to the PPT, however, the European Commission has recommended that the Member States align the wording proposed by the OECD “with the case law of the Court of Justice of the European Union as regards the abuse of law” so that treaty benefits are also granted if the respective arrangement or transaction “reflects a genuine economic activity”.197 Notwithstanding their careful construction, the above measures raise concerns with regard to fundamental taxpayers’ rights, such as the right to legal certainty and the freedom to arrange one’s economic affairs. Indeed, there is an implied borderline between the letter of the law – that is followed – and what lies beyond such letter, the “spirit of the law” that is violated. This reliance on the spirit of the law seems, moreover, to be a more general trend. The OECD Guidelines for Multinational Enterprises, for example, contain a clear obligation for multination-als to comply with the spirit of tax law198 and similar references can be found in national legal frameworks, e.g., the UK Code of Practice on Taxation for Banks.199 This, of course creates risks, commercial, reputational and others, for multinationals that fail to adhere to the call in-corporating compliance with the spirit of tax law in their public reports. Strong reliance on the evasive and oftentimes blurred “spirit of the law” (or its “object or purpose”), especially in light of different approaches in various jurisdictions, might therefore put disproportionate burdens on taxpayers. In any case, proper safeguards should be put in place for taxpayers’ rights, e.g., through fair allocation of burden of proof and implementation of drafting standards for tax leg-islation.

Gaar As Tax Treaty Override – Slovak Perspective

DANUBE: Law and Economics Review, 2017

The article summarises the views on the interrelation of GAARs and tax treaties, abstracts defining criteria for the feasibility of GAAR as an anti-abuse instrument in tax treaty situations and applies these to the situation (legislation and case law) in the Slovak Republic. The aim of the article is to provide insight on the potential interrelation of GAAR rules with existing tax treaties and formulate policy advice that should be optimal given the facts at hand. It shows that GAAR in its current form would in general have limited effectiveness in tackling tax treaty abuse situations without it resulting in treaty override. This particularly applies to the Slovak Republic and likely to other states applying a monistic approach to international treaties, where the renegotiation of the treaty seems the only viable option. However, as in Slovakia the monist approach applies only to treaties ratified after July 2001, a different approach might be taken with respect to those that are st...

The EU Directive against Tax Avoidance (ATAD-1)

Contemporary issues in Tax Research, 2017

The Anti Tax Avoidance Directive (ATAD-1) is perhaps the most important goal achieved so far by the European Union in the struggle against international avoidance and evasion: it makes the most of the findings and recommendations OECD summarized in the BEPS action plan. The goal of this paper is to compare the solutions adopted by the EU in the directive with the domestic provisions already in force in some member States, including Italy and the UK. The methodology chosen is comparative in its nature. Qualified anti-avoidance provisions (such as GAARs and DPT) already in force on a national scale have be tested in order to see whether they are compatible with the new European guidelines and rules. The first findings allow the interpreter to draw different conclusions depending on the national rules tested. While for some of them, such as the DPT (Diverted Profits Tax) the consistency with OECD recommendations and EU law is uncertain, others (such as most of the National GAARs) appear to be already compliant with the new European standards. In this later case however, the influence of EU law will be arguably essential in terms of interpretation of the rule, widening or narrowing its scope, together with the need to counterbalance the power of the Tax administration with the protection of the fundamental rights of the taxpayer that some Administrations are reluctant to grant while making use of GAARs. The conclusions stress also the innovative double standard approach of the EU legislator that made use of different provisions (more or less aggressive towards the taxpayer) depending on whether the tax structure is European or involves also third Countries.

GAAR as a tax treaty override -Slovak perspective

2017

General Anti-Avoidance Rules Revisited: Reflections on Tim Edgar's "Building a Better GAAR

Canadian Tax Journal/Revue fiscale canadienne

In addition to the requirement of a tax benefit or advantage, the application of most modern general anti-avoidance rules (GAARs) turns on two elements: a "subjective element," which considers the purpose for which the transaction or arrangement resulting in the tax benefit or advantage was undertaken or arranged; and an "objective element," which considers the object or purpose of the relevant provisions to determine whether the tax benefit resulting from the transaction or arrangement is consistent with this object or purpose. Although these two elements are present in most modern GAARs, the function of each element within these rules and the relationship between them are often poorly understood. Other unresolved issues concern the roles of artificiality and economic substance in the application of these rules, and the relationship, if any, between these concepts and the "subjective" and "objective" elements of the rules. A final set of issu...