The General Anti-Abuse Rule Proposed by the European Commission

Abstract

This article takes a close look at the General Anti-Abuse Rule (GAAR) proposed by the European Commission in the recommendation of 6 December 2012 on aggressive tax planning. After an explanation of the background, the wording of the GAAR will be analysed. Next, aspects of the different approaches to interpretation and differences in the judicial system of Germany and the United Kingdom as two Member States as well as different styles of legislation will be analysed insofar as they could be relevant to the application of a uniform GAAR. The analysis shows that it is likely that German courts would interpret the proposed GAAR more broadly and apply it more often than British courts as German and British courts have different approaches to interpretation. Furthermore, in the parts of Germany where the ministerial administration is responsible for the selection of judges and the majority of them comes from the revenue, judges might be more revenue-friendly. It is therefore likely that the proposed GAAR would not be applied uniformly and most of the potential benefits such as simplification and increased legal certainty are unlikely to be achieved. However, the GAAR would impose a minimum standard of anti-avoidance measures, so there is no run towards the lowest standard. These conclusions can be applied to a supranational concept of tax abuse as well.