EU General Anti-(Tax) Avoidance Mechanisms: From GAAP to GAAR

Abstract

The EU principle of prohibition of abuse of law has been developing within the jurisprudence of the CJEU, through a process of reverberation, since the mid-1970s. Despite its wider scope of application, it is argued that within taxation the principle has assumed the role of a de facto General Anti-Avoidance Principle (GAAP), with the characteristics of a legal principle, rather than merely an interpretative one. Insofar as taxation is concerned, this GAAP has now been partially codified with the entry into force of the Anti-Tax Avoidance Directive (ATAD), which includes a new EU General Anti-Avoidance Rule (GAAR). The aim of this paper is to consider the process of development of general anti-tax avoidance mechanisms within the EU: from the jurisprudential creation of the GAAP, to the eventual approval of the GAAR, and the interaction between the two. It is argued that this is both a natural progression, demonstrated by the fact that, despite key differences, there are clear parallels between the EU process, and that witnessed in other countries, including the UK; and a positive one, so long as the EU GAAR is conceptualised as a manifestation of the EU GAAP, and that their application follows the standard hierarchy of legal norms. It concludes that the coexistence of a GAAP and a GAAR within the EU legal system is far from redundant, and presents significant advantages.