ATAS. 4 and 5 September Anti-Avoidance Rules: Judiciary. Wim Wijnen. Your Portal to Cross-Border Tax Expertise

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1 ATAS 4 and 5 September 2012 Anti-Avoidance Rules: Judiciary Wim Wijnen Counsel to the Academic Chair, IBFD Professor of International Tax Law, LUISS, Rome Judge Court of Appeals, s-hertogenbosch, The Netherlands 1 Tax treaty case law Issues of this presentation: - The importance of tax treaty case law - Tax treaty case law in the world - The usefulness of foreign case law - The convergence of the interpretation of tax treaties 2 Ferra 1

2 Tax treaties and case law Importance of case law - OECD/UN Models/commentaries improved/extended in course of the years - ultimate test is in court 3 Interpretation of tax treaties OECD/UN Models and tax treaties - Abstractly formulated OECD/UN Commentaries - Gradually considerably extended, e.g. GAAR Vulnerability: need for interpretation Important role for judges. However: number of countries with case law limited 4 Ferra 2

3 Countries > 3 decisions AMERICA EUROPE ASIA 1.Canada 6.United Kingdom 20.Spain 25.India 2.United States 7.Ireland 21.Portugal 26.Malaysia 3.Mexico 8.Norway 22.Poland 27.Kazakhstan 4.Brazil 9.Sweden 23.Hungary 5.Argentina 10.Finland 24.Russia REST 11.Denmark 28.Australia 12.Netherlands 29.New Zealand 13.Belgium 30.South Africa 14.Luxembourg 15.Germany 16.Austria 17.Switzerland 18.France 19.Italy 5 Countries > 50 decisions 1. India 1,500??? 11. Switzerland Netherlands Sweden Germany Norway Belgium Denmark France United States Canada Italy Austria Spain Ferra 3

4 Number of cases Reasons for limited number of cases: - The procedure is too costly - The procedure takes too much time - Taxpayers prefer a compromise with the tax inspector - Taxpayers do not know how to take their case to court - Taxpayers refrain from taking their case to court because the outcome of the procedure is uncertain due to a lack of experience in the courts 7 The development of case law General tendencies in the development of tax treaty case law in countries: - purely formal issues - factual issues - other treaty interpretation issues 8 Ferra 4

5 Judiciary and tax treaties Many judiciaries no experience in tax treaty law The impact of the judicial system How to lend a hand? Is there anything that the tax inspector could do? Passive and active judges The importance of foreign decisions for courts and parties Diverging interpretation by courts in treaty partner states 9 The impact of foreign case law Is there a requirement for a common interpretation of tax treaties? Klaus Vogel Gebot der Entscheidungsharmonie 10 Ferra 5

6 Common interpretation principle This principle means that courts...of one Contracting State should look at decisions made by courts... of the other Contracting State when confronted with problems of interpretation and that they test whether their interpretation can be transferred. If they are plausible and if their application may lead to the avoidance of double taxation, they should at least be considered and any deviation from them should be explained explicitly and convincingly. (Vogel, General Report on Interpretation of double taxation conventions, IFA Congress 1993, Florence) 11 Use of foreign case law in practice IFA Congress Brussels 2008: courts in Netherlands : frequently referred to Canada : frequently referred to, especially common law Australia UK Germany Austria India France Italy : frequently referred to, especially common law : sometimes referred to : sometimes referred to : reference to German case law not uncommon : frequently referred to common law, other less : limited : none 12 Ferra 6

7 Foreign case law Availability: International: no centralized archive - neither at OECD nor UN Domestic: diverging publication policies Accessibility: language 13 Tax treaty case law database Database: - all domestic decisions available in one place - automatic convergence of the interpretation of tax treaties - no institutionalization, no procedures IBFD Tax Treaty Case Law Database 14 Ferra 7

8 The ambition of the database The database includes decisions of - all countries - all higher and lower courts - all cases, i.e. new and old 15 Concept of the database I All case law dealing with tax treaties on - Income and capital - Estates/inheritances and gifs - Shipping- and air transport profits - Exchange of information 16 Ferra 8

9 Concept of the database II The database includes decisions dealing with the interpretation of tax treaties. The database does not include decisions dealing with - the mere application of tax treaties - domestic rules of international tax law However, grey areas: transfer pricing, residence and elimination of double taxation 17 Content of the IBFD database Tax treaties: 4,000 Tax treaty cases: 5,500 Currently in the database: - Identified in register 4,300 - Summaries 3,000 - Texts 3, Ferra 9

10 Convergence of the interpretation The convergence of the interpretation of tax treaties triggered by tryptich: - Tax Treaty Case Law Database - International Association of Tax Judges - International literature 19 THE END 20 Ferra 10