Prof. Dr. Pasquale Pistone Institute for Austrian and International Tax Law Justifications: Claires vs. Obscures Prof. Dr. Pasquale Pistone

Prof. Dr. Pasquale Pistone Institute for Austrian and International Tax Law 2 Acte clair and justifications Basic issues: nMay justifications be object of acte clair? nIf yes, how does the evolution of European law affect them nClaires and obscures justifications nJustifications and third countries

Prof. Dr. Pasquale Pistone Institute for Austrian and International Tax Law 3 May justifications be the object of acte clair: yes! Cilfit, 14: point of law in question…even though the questions at issue are not strictly identical  flexible interpretation in line with later evolution of case law Once boundaries of justification have become clear, then case-to-case analysis involves the facts and may be carried out by the national Court e.g. to the extent that abuse is clear, the national Court could ascertain the suitability and proportionality of the anti-abuse measure, based on the criteria given by the ECJ NB: But the evolution of European law has to be taken into account: cohesion was once a justification, but is it still? Manninen, 46; Comm. vs. DK, 71

Prof. Dr. Pasquale Pistone Institute for Austrian and International Tax Law 4 The catalogue of claires and obscures justifications Claires Accepted: abuse (VAT) Rejected: Loss of revenue, compensatory advantages, lack of harmonization Obscures Accepted: abuse (direct taxes), balanced allocation of taxing powers, cohesion, effectiveness of fiscal control, risk of double dipping, territoriality Rejected: difference due to tax treaties

Prof. Dr. Pasquale Pistone Institute for Austrian and International Tax Law 5 An example: tax treaties and the balanced allocation saga n The primacy of European law may not be made subject to…tax treaties and their condition of reciprocity (Avoir Fiscal, 26) n Allocated…powers by means inter alia of international agreements must comply with the primacy of EU law (S.Gobain, 56) n Reciprocal rights and obligations only apply to residents of Contracting States; provisions of a tax treaty are an integral part thereof and contribute to its overall balance (D, 61) n THE ANSWER? - Marks & Spencer, 46 and Cadbury Schweppes, 56: abusive practices may not overturn the balanced allocation of taxing powers

Prof. Dr. Pasquale Pistone Institute for Austrian and International Tax Law 6 No acte clair on abuse in the field of direct taxes n Two (three?) different tax patterns for abusive practices: l Abuse = tax evasion - wholly artificial arrangements (ICI, 26 + Cadbury Schweppes, 51) u Consequence: almost never a justification l Abuse = tax avoidance – Halifax, Thin Cap GLO, 81 u Consequence: giving MSs a possible justification in line with the goals of the EC Treaty and ECJ case-law l ≠ Kofoed, 38 = Leur-Bloem, 44 n Need for clarity: l Abuse: tax avoidance or tax evasion? l Abuse and double dipping l Abuse and the effectiveness of fiscal supervision

Prof. Dr. Pasquale Pistone Institute for Austrian and International Tax Law 7 Justifications and third countries n FII, 171 = AG Bot on A, 57: a MS…[may] demonstrate that a restriction…is justified…in circumstances where that reason would not constitute a valid justification…between MSs But no acte clair within the Internal Market! n Effectiveness of fiscal supervision: Talotta, 37 not a proportionate justification; Scorpio, withholding taxes justified and proportionate in the absence of directive on collection of taxes n Thin Cap GLO, 82: taxpayer must be allowed to give evidence without administrative constraints What scenario in relations with third countries? The relevance of DTCs and Art. 26 OECD MC