Avoidance and Abus De Droit : The European Approach in Tax Law

Defining tax avoidance has been always a nearly impossible quest for tax lawyers. In Continental Europe, however, it could be said that the notion of avoidance is strongly embedded to the concept of abuse of a right, being an abuse, according to the Roman law tradition, the exercise of a right inconsistently with the general principles of correctness, good faith or even with the basic rules of ethics. Therefore the definition of avoidance is not purely legal, but it depends also on other disciplines which influence it. In EU law qualifying avoidance is even more complex as the law of the Union is nearly deprived of any influence by other systems of values, the only general principles to rely on are the fundamental freedoms and the nondiscrimination principle both enshrined in the Treaty. That is why when in recent cases the Court had to rule on the abuse of law it did its best to find principles or values to build the concept on. The results were different in direct tax and in VAT cases: the notion of abuse can be wider in some of them and narrower in some others as far as it depends on the background to the specific provisions discussed. In case of the VAT the system is more complex and the court has to strike a balance between the need for neutrality of the tax and the coherence. In direct tax cases only the Treaty is applicable, and together with it the freedoms bestowed upon the taxpayer who can make the most of them in any case, unless the purpose of the scheme implemented is only to save taxes