Curbing ‘Abusive’ International Tax Planning Under EU Law : The Case of the Merger Directive

Taxation inevitably gives rise to tax planning. In the era of globalization, multinationals in particular will (re-)organize their business so as to make an optimal use of international tax sheltering opportunities. In order to curb ‘aggressive' tax arbitrage, all developed jurisdictions rely on targeted anti-avoidance provisions and mostly also on general anti-avoidance rules or doctrines. In areas of taxation that are harmonized by EU law, tackling tax avoidance schemes becomes even more complex due to the influence of the European Court of Justice (CJEU) doctrine of prohibition of abuse of law. The paper analyses the anti-avoidance clause of Art. 15 of the EU Merger Directive, which was most refined reflection of that doctrine in direct tax law before the adoption of Art. 6 ATAD. To that effect, the paper first examines the Union law concept of tax avoidance in general, and under the Merger Directive in particular. The corresponding sections critically analyze the doctrinal approach of the CJEU; they also put it into perspective within the broader context of the distinction between ‘abusive' versus acceptable international tax planning under EU law. Second, the paper highlights the implications of Art. 15 Merger Directive with respect to national anti-avoidance rules or doctrines that apply to cross-border reorganizational operations. A possible direct effect and mandatory nature of these and other ‘anti-tax abuse'-provisions of EU law are discussed, as well as questions of burden of proof and the admissibility of legal presumptions of tax avoidance