The unbearable burden of (dis)proving EU tax avoidance

Takeways from my Tax Notes International column 'A Certain Tax Position', May 7, 2018

• Domestic Member State anti-avoidance tax rules may be struck down if they infringe EU laws or principles, like the freedom of establishment

• Conversely, domestic laws that potentially infringe EU laws or principles may be validated on grounds of preventing tax avoidance

• Defining tax avoidance for these purposes has proved a difficult job both for the EU Court of Justice and the EU legislator

• Identifying who has to prove the constituent elements of tax avoidance (however defined) is also difficult but can be crucial for the outcome of a particular case

• Statutory presumptions of abuse can provide useful bright-line certainty but are subject to particular scrutiny by the EU Court

• Taxpayers should generally have the ability to rebut presumptions of tax avoidance but the tax authorities have to provide initial (prima facie) evidence

• What amounts to such prima facie evidence is unclear and currently being tested before the EU Court: various Member States’ rules have already failed the test, with more likely to follow

• Meanwhile the landscape is changing with new reporting and disclosure rules shifting the burden back to the taxpayer: how long before these too are challenged before the EU Court?

Could not be more topical - see Advocate-General Kokott's opinion in the N Luxembourg case.