Preventing Treaty Abuse

I. S. 518Introduction

A. Domestic GAAR – a Weapon against Aggressive Tax Planning

During the past years, countries have become more and more worried about their tax revenues. In order to increase tax revenues the G20 countries and the OECD began the Base Erosion Profit Shifting (the “BEPS”) project. Furthermore, many countries have also adopted a general anti-abuse rule (“GAAR”) even though rules of which the scope of application is not exact have been previously unfamiliar in their domestic legislation. For example, the United Kingdom and South Africa have adopted a GAAR in their legislation. In some other countries as Finland and Germany, the GAAR has been a part of domestic legislation for many decades. The Council of the European Union has also proposed a new directive against tax avoidance practices that directly affect the functioning of the internal market: it also includes a GAAR. Consequently, in the future it is likely that all EU Member States will implement a GAAR their domestic legislation.

Basically, the GAAR is a tool for preventing abuse of tax law in all kinds of circumstances. The object and the purpose of the GAAR can be achieved also by using an interpretative tool devel...