Concept and Implementation of CFC Legislation

S. 3781. Interactions between national regulations on tax avoidance and tax treaty law

1.1. International tax law and the avoidance of taxation problem

The problem of taxation avoidance has been subject to discussions between practitioners and scholars for a significant number of years. One of the methods that could help stand against more aggressive forms of tax avoidance is implemented through national rules such as the CFC principles.

An element in the discussions on preventing tax avoidance concern the level to which national measures such as CFC rules may intervene into the already established tax treaty context. Different states seem to present various opinions about this issue. There are also different views about the interactions between treaty law and national law. The main question, typically, is if national law can interfere with tax treatment of bilateral, cross-border events to prevent aggressive tax avoidance irrespective of the established order of treaty law. From this perspective, the relation between international tax conventions law and local law should be analysed. This relation may sometimes require a complex analysis on the ,hierarchy of the two legal frameworks, the s...