COUNTERING UNACCEPTABLE TAX AVOIDANCE THROUGH GENERAL ANTI-AVOIDANCE RULE IN EU TAX LAW
Abstract
To reduce tax avoidance, most nations use either judicial anti-avoidance doctrines (eg. substance over form doctrine) or legislative anti-avoidance rules that occur in the form of general and specific anti-abuse rules. The specific anti-avoidance rules (SAARs) in most cases simply mechanically deny certain tax benefits under certain conditions and their goal is to prevent avoidance or abuse of specific rules in the tax code. Therefore these rules are not effective in tackling tax avoidance arrangements that exploit tax law loopholes in a way that was unforeseen when the tax law was enacted.
A solution for this problem has been found in the general anti-avoidance rule (GAAR) that has been recognized as a “final weapon against all the creative and aggressive tax avoidance scenarios”.
In January 2016 the European Commission introduced a proposal for a Council Directive on “rules against tax avoidance practices that directly affect the functioning of the internal market” (Anti Tax Avoidance Directive, ATAD) which was approved in July 2018. One of the measures provided by the ATAD is a general anti-avoidance rule that aims “to tackle abusive tax practices that have not yet been dealt with through specifically targeted provisions”. Apart from EU, many other countries like the United Kingdom, Canada, Australia, New Zealand, China, India, etc. have also introduced GAAR.
Considering the great importance of GAAR in tackling tax avoidance, as well as the fact that it does not exist in the tax law of the Republic of Serbia, this article will analyze GAAR in EU tax law. In the first section, we define tax avoidance and tax evasion, distinguishing the two terms, and answer the question “why do we need GAAR”. In the second part, we present the elements of the GAAR and the consequences of its application. Finally, in the third part, this article addresses the issue of legal certainty with regard to the application of GAAR. The subject of the analysis will be the ATAD’s GAAR, and the case-law of the European Court of Justice in tax avoidance cases in the context of abuse of Union law.
References
Анђелковић М. (2014) Законита неприхватљива пореска евазија − проблеми дефинисања и спречавања, Зборник радова Правног факултета у Нишу, 67, 79-98.
Atkinson C. (2012). General anti-avoidance rules: Exploring the balance between the taxpayer’s need for certainty and the government’s need to prevent tax avoidance, Journal of Australian Taxation, 14(1) ,1-56.
Chen S.C. (2018). Predicting the “unpredictable” general anti-avoidance rule (GAAR) in the EU Tax Law, InterEULawEast: 5(1), 91-120.
Prebble R. (2005). Does Croatia Need a General Anti-Avoidance Rule? Recommended Changes to Croatia’s Current Legislative Framework, Financial Theory and Practice 29(3), 223.
Čičin-Šain N. (2016) Opće pravilo za sprječavanje izbjegavanja poreza uvedeno u sustav poreza na dobitak, Pravo i porezi, 12-17(10).
De Boer R., Marres O. (2015). BEPS Action 2: Neutralizing the Effects on Hybrid Mismatch Arrangements, Intertax: 43(1), 14-41.
De Wilde M. F. (2017). The ATAD’s GAAR: A Pandora’s Box? Dostupno na https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3040709
Fernandes D., Sadiq K. (2016). A Principled Framework for Assessing General Anti-Avoidance Regimes, British Tax Review, 2. 172-207.
Freedman Judith. 3/2014. Designing a General Anti-Abuse Rule: Striking a Balance, Asia-Pacific Tax Bulletin: 20, 167-173.
Freedman J. (2004). Defining Taxpayer Responsibility: In Support of a General Anti-Avoidance Principle, Working paper, British Tax Review, 4, 332-357.
Gadžo S., Klemenčić I. (2014). Time to stop avoiding the tax avoidance issue in Croatia? A proposal based on recent developments in the European Union, Financial Theory and Practice: 38 (2), 272-302.
Gadžo S., Klemenčić I. (2014). Analiza normativnog okvira za sprječavanje zakonitog izbjegavanja poreza u Hrvatskoj: Prijedlog izmjena u skladu sa pravo Europske unije, Odabrani prijevodi, Institut za javne finansije, 25.
Jones Avery J. (1999). The David R Tillinghast Lectrue: Are Tax Treaties Necessary? Tax Law Review: 53(1), 1-38.
Костић С. (2016). Начело фактицитета у српском пореском праву, Harmonius, 5. 112-128.
Kesslee J. (2004). Tax Avoidance Purpose and Section 741 of the Taxes Act 1988, British Tax Review. 375 (nav. Prema Xuereb A. (2015). Tax avoidance or tax evasion? Symposia Malitensia 10, 217-229.)
Koroncziova A., Kačaljak M. (2017(. GAAR as Tax Treaty Override – Slovak Pespektive, Danube: Law and Economics Review: 8(3), 139-155.
Krever R. (2016). Chapter 1. General Report: GAARs. In: GAARs - A Key Element of Tax Systems in the Post - BEPS TAX World. Lang M. et al. (eds), WU Institute for Austrian and International Tax Law, European and International Tax Law and Policy Series, Volume 3. Amsterdam: IBFD.
Loutinsky G. (2010). Gladwellian Taxation: Deterring Tax Abuse Throuh General Anti-Avoidance Rules, Temple Political & Civil Rights Law Review: 19 (2), 101-135.
Lang M. et al. (2016). GAARs - A Key Element of Tax Systems in the Post-BEPS World, IBFD.
Marres O. (2018). The Parent Subsidiary Directive, 219-278, in European Tax Law - 7th Edition, Wattel J. P., Marres O., Vermeulen H. (eds.) Deventer: Wolters Kluwer.
Nayak R. (2012). Navigating India’s Proposed GAAR, International Tax Review: 23(7).
Navarro A., Parada L., Schwarz P. (2016). The proposal for an EU Anti-avoidance Directive: Some preliminary thoughts”, EC Tax Review: 25(3), 117-131.
Поповић Д. (2017). Пореско право, 15. измењено и допуњено издање, Београд: Правни факултет Универзитет у Београду.
Поповић Д., Илић Попов Г. (2019). (Не)уставност одредбе о тесту главног циља трансакције или аранжмана из пореских уговора, Анали Правног факултета у Београду, 67(2), 7-30.
Prebble R., Prebble QC J. (2010). Does the Use of General Anti-Avoidance Rules to Combat Tax Avoidance Breach Principles of the Rule of Law? Saint Louis University Law Journal, 55 (1), 21-46.
Prebble J., Prebble R. 4/2008. Comparing the General Anti-Avoidance Rule of Income Tax Law with the Civil Law Doctrine of Abuse of Law, Bulletin for International Taxation 62 (4), 151-170.
Smit D. (2018). The Anti-Tax-Avoidance Directive (ATAD), in European Tax Law,Volume 1 – General Topics and Direct Taxation, 7th Edition, 7th Edition, Wattel J. P., Marres O., Vermeulen H., Deventer: Wolters Kluwer, 485-538
Teijeiro O. G. 2017/18. Anti-avoidance Measures of General Nature and Scope – GAAR and Other Rules (Argentine Report), Seul IFA Congres.
Waerzeggers C., Hiller C. (2016). Introducing a General Anti-Avoidance Rule (GAAR): Ensuring that a GAAR Achieves its Purpose, Tax Law IMF Technical Note, 1.
Wright N. dePencier. (2015). GAAR: Reconciling Legal Certainty with Laudable Public Policy Objective, https://www.wrightbusinesslaw.ca/wp-content/uploads/ 2015/12/Nick-Wright-GAAR-Reconciling-Legal-Certainty-LLM-Tax-Policy-151215.pdf.
Way QC P. (2013). The Rule of Law, Tax Avoidance and the GAAR, GITC Review: 12(1).