Prohibition of abuse of rights and tax avoidance addressed in new thesis

The term ‘abuse of rights’ refers to behaviour that fulfils the legal conditions for obtaining benefits, but at the same time defeats the purpose of the legislation. In situations where the legislator has not foreseen the abuse, states usually counter it through various legal measures. One way is for courts to interpret laws to close loopholes or establish anti-abuse doctrines, which sometimes develop into general principles of law. In tax law, legislators can create general anti-avoidance rules (GAAR), which allow rights or benefits to be denied in certain circumstances. A common feature of such measures is that they do not provide a precise definition of what constitutes abuse while giving the authorities applying them flexibility to deal with abuses. Thus, general anti-avoidance measures are general in nature and often contain abstract or vague elements.

“These types of measures are controversial in terms of traditional notions of predictability, legality and the rule of law. They do not allow the taxpayer to avoid taxation through complex structures aimed at circumventing the law - even if the letter of the law is followed strictly speaking,” explains Gunnar.

There have been major developments in international tax law in recent years. International organisations and states are constantly implementing more and more complex rules to combat tax evasion. For example, the Council of the European Union and the Court of Justice of the European Union have required EU Member States to implement general anti-avoidance measures in their domestic laws and to counter abuse of rights.

“The aim of my thesis is to identify and compare different criteria that need to be met in different areas of EU tax law in order to be able to assess whether arrangements can be considered abuse of rights or tax avoidance. There have been different views on what characterises abuse in the context of the measures studied in the thesis and whether there are different types of elements in different areas.”

The study analyses both the material and formal conditions that determine what constitutes abuse. The material conditions concern the nature of the arrangements made by taxpayers and determine what is considered abusive. The formal requirements determine how EU Member States should assess whether an activity is abusive. The material conditions deal with what constitutes abuse, while the formal criteria deal with how the assessment of abuse should be made.

“The study shows, among other things, that there are great similarities in what is considered to be abuse in EU tax law and that the harmony between different areas is greater than one might think from the textual formulations of the abuse concept,” says Gunnar.

“I hope that the thesis provides better insight into what is considered an abuse of rights in tax law compared to what we have known before.”