Predicting the ‘Unpredictable’ General Anti-Avoidance Rule (GAAR) in EU Tax Law

InterEULawEast: Journal for the International and European Law, Economics and Market Integrations, Vol. 5, Issue 1, 2018

30 Pages Posted: 6 Aug 2018 Last revised: 30 Sep 2018

See all articles by Shu-Chien Chen

Shu-Chien Chen

Erasmus University Rotterdam (EUR), Erasmus School of Law; University of Amsterdam, Faculty of Law, Students

Date Written: June 20, 2018

Abstract

General Anti-Avoidance Rule (GAAR) is a type of rule designed to combat the tax-avoidance scenarios that in a legal form lawfully but aims to circumvent the legal consequences. GAAR is necessary for a tax system to address unexpected innovative tax avoidance scenarios. In the field of tax law, GAAR has been criticized for being too abstract and thus harmful to legal certainty. In the context of EU integration, the concept of GAAR has been developed and elaborated by Court of Justice of European Union as well as secondary laws, but there are quite a few different formulations. In the existing literature, it is established that, there are the subject test and the objective test cumulatively in the GAAR, which examines the taxpayers’ subjective intension and the objective economic reality. As to the relation between these two tests, scholars have established the theory that, the formulation and the context of the subjective test is actually influenced by the tax rule involved (that is, the purpose of the norm being circumvented). This paper will revisit GAARs in the EU tax law and present that, the theory of GAAR based on the purpose of the violated tax norm is indeed supported by latest case law of CJEU as well new Directives. Furthermore, the intention of the norm reconciles the subject test and the objective test. In this regard, the unpredictability of ‘GAAR’ actually has become more predictable.

Keywords: General Anti-Avoidance Rule (GAAR); EU law; Abuse of Law; Common Consolidated Corporate Tax Base (CCCTB); Anti-Tax Avoidance Directive (ATAD); legal certainty

JEL Classification: K34

Suggested Citation

Chen, Shu-Chien, Predicting the ‘Unpredictable’ General Anti-Avoidance Rule (GAAR) in EU Tax Law (June 20, 2018). InterEULawEast: Journal for the International and European Law, Economics and Market Integrations, Vol. 5, Issue 1, 2018, Available at SSRN: https://ssrn.com/abstract=3210833

Shu-Chien Chen (Contact Author)

Erasmus University Rotterdam (EUR), Erasmus School of Law ( email )

Netherlands

University of Amsterdam, Faculty of Law, Students ( email )

Amsterdam
Netherlands

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