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The ‘EU arm’s length principle’ gradually evolved into an ‘EU arm’s length tool’ in the Starbucks, Fiat, Apple, and Amazon judgments of the General Court of the European Union (‘GC’). This contribution analyzes in detail why a ‘principle’ progressed into a ‘tool’ in these judgments. For this matter, it considers the arm’s length standard from the point of view of the regulation strategy of states (i.e., a reflexive regulation strategy) to govern the taxation of multinational companies. The author maintains that the regulatory design of the arm’s length standard entails a choice for ‘reflexive transfer pricing law’ and subsequently relies on that perspective for analyzing the judgments of the GC. This angle meticulously illustrates that the abuse of discretionary powers by the tax authorities in the process of monitoring the residual profit allocation of the taxpayer constitutes the relevant state aid problem. The contribution concludes that the GC eventually devised a rather toothless ‘tool’ that does not properly address this issue. At the same time, it also concludes that it should be relatively straightforward for the Court of Justice EU to finetune the ‘EU arm’s length tool’ in order to establish an effective and foreseeable reconciliation of EU state aid law and transfer pricing law. For this matter, the contribution puts forward a concrete recommendation. EU fiscal state aid control, EU state aid law, EU arm’s length principle, EU arm’s length tool, transfer pricing, residual profit allocation, APA, Apple

This article focuses on the complex challenges affecting the relationship between different tax systems (national, international and EU) within a context, like the current GloBE project, which is looking for appropriate tax measures applying on a global scale. In fact, the need of developing tax measures with a global character requires specific attention to be given to issues concerning the effectiveness of these measures in light of the relationship between the relevant tax systems. More specifically, within the framework of this article, the analysis aimed at evaluating the possibilities of guaranteeing a fully effective application of the GloBE income inclusion rule has been conducted on the basis of two crucial factors, i.e. (1) the compliance of the income inclusion rule with international tax treaty law and with EU tax law, and (2) the coordination between international tax treaty law and EU tax law. Global Anti-Base Erosion (GloBE) project, Pillar Two, Income Inclusion Rule, BEPS, CFC legislation, Abuse, OECD/G20 Inclusive Framework, Saving Clause.

On 23 July 2020, the European Commission launched public consultations on two tax related proposals, namely a revision of the Energy Taxation Directive and the creation of a Carbon Border Adjustment Mechanism. These proposals are part of the European Green Deal, a strategy that aims, amongst other things, to put the well-being of citizens at the centre of economic policy. In this article, the well-being aims put forward in the Green Deal are considered in connection with the Commission’s tax related proposals in that regard as included in the public consultations of July 2020. It is concluded that, while taking on board well-being aims may be valuable in that it obliges to consider in a broad way what is good for people, the current references to well-being by the Commission in the Green Deal lack clarity and raise a number of important questions. Recommendations are provided, also with respect to the envisaged role of taxation in tackling environmental issues.

The primary aim of this article is to question whether the general anti-abuse rule (GAAR) of Anti-Tax Avoidance Directive (ATAD) is an effective tool to tackle tax avoidance. By using a comparative technique as a method, other directives that include a GAAR will be analysed as a companion to the ATAD to identify whether there is a common understanding of the concept of abuse of tax laws within the EU legal order. Then the general consequences of the application of the GAAR of the ATAD will be exposed. The difficulties which could be encountered in the application procedure will be explained around some potential scenarios, based on simple models developed by the author. Tax Avoidance, Abusive Tax Practices, Artificial/Genuine Arrangement(s), Main Purpose(s) Test, Tax Advantage, General Anti-abuse Rule(s) (GAARs), Anti-Tax Avoidance Directive (ATAD), Interest-Royalties Directive, Merger Directive, Parent- Subsidiary Directive.

espanolDurante el COVID-19, el papel emergente de la comunidad para hacer frente a los desafios de la pandemia ha sido bastante visible. El valor de la solidaridad impregna nuestras sociedades, y en algunos casos ha reemplazado la accion de los poderes publicos. Este articulo aprovecha los nuevos roles adquiridos por los ciudadanos para re-disenar politicas fiscales bajo un nuevo enfoque desde lo colectivo. Para llevar a cabo esta tarea, este autor se centra en las medidas fiscales para preservar el patrimonio cultural. Hasta la fecha, las medidas fiscales en este campo reproducen un enfoque predominantemente estatal bajo un claro mandato a las autoridades publicas de preservar el patrimonio cultural. Este articulo se aparta criticamente del regimen actual de proteccion del patrimonio cultural para proponer nuevas medidas fiscales bajo un enfoque mas comunitario. Es la comunidad de ciudadanos quien decide que es patrimonio cultural y si se debe proteger. Esas nuevas medidas fiscales, en concreto, un regimen de las cooperativas culturales, podrian implementarse a nivel de la Union Europea. Para ello, se necesitaria una interpretacion innovadora del parrafo 5 del articulo 167 del TFUE. EnglishIn the current COVID-19 times, the emerging role of the collectivity to face up the challenges of the pandemic has been quite visible. The value of solidarity pervades our societies, and in some cases, it sidesteps the action of the public authorities. Accordingly, this contribution makes the attempt to take advantage of the new roles acquired by the citizens in order to re-design tax policies under a bottom-up approach. To accomplish this task, this author focuses on the tax measures to preserve cultural heritage. To date, the tax measures in this field reproduce a top-down approach under a clear mandate of the public authorities to preserve cultural heritage. This article critically departures from this current regime to preserve cultural heritage to propose new tax measures under a community approach. Such new measures, namely a regime for cultural heritage cooperatives, could be enforced at EU level. Therefore, an innovative re-interpretation of article 167 (5) TFEU is needed.

The launching of the new tobacco products, namely e-cigarettes and heat-not-burn tobacco, poses a challenge to the current EU legal framework of the excise duty applied to manufactured tobacco, currently under the revision by EU Commission. This contribution grasps the tobacco example to question the EU legitimacy to harmonize within Article 113 Treaty of Functioning of the European Union (TFEU).

Over the last decades, we have generally seen a gradual shift from pay-as-you-go (PAYG) to funding to finance pensions. In this paper, we develop an analytical framework that includes three models of pension design, allowing us to study the role of efficiency, redistribution, and time-consistency in pension policies. We use these models to analyse the impact of several trends (a permanent decline in the rate of return on financial markets, a decline in the average rate of economic growth, decreased output volatility and increased capital market volatility) on the optimal balance between PAYG and funding. Although the models lead to similar qualitative results, general conclusions cannot easily be drawn as the various trends work in opposite directions. A numerical simulation experiment with a calibrated version of the time-consistent model shows that it may be wise to halt the shift towards more funding. There is insufficient evidence however to call for a real revival of PAYG.

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In recent years international taxation has become a hotly disputed topic. Luxleaks, Pamana papers, Paradise Papers, State Aid-cases, etc. received a lot of media coverage. As a result, tax is at the top of the political agenda of for example the G20, OECD and EU and many substantial changes are taking place. Rebuilding trust among major stakeholders is crucial for a sustainable international infrastructure in respect of taxation. The current unrest with regard to multinational companies’ tax planning practices shows that society demands companies to integrate tax governance in their corporate governance. Society demands moral evaluation of tax planning practices - even if it is legal tax avoidance, aimed at minimising companies’ tax liability. Companies do well, therefore, to integrate ethical risks with regard to tax in their risk management. Paying taxes and morality are apparently connected. This article will elaborate on the moral dimension of paying taxes. Tax administrations are also interested in the governance of taxation, because the tax behaviour of multinational enterprises can indicate much regarding their acceptance of risk and attitude towards tax planning. But how can they trust that multinational companies are complying with the law and want to build a good relationship with tax administrations and society? We focus on tax codes of conduct which are currently used by companies and regulators in an attempt to obtain greater control over economic and social relationships. Corporations publish codes to communicate their standards of ethical behaviour internally and externally - enabling (moral) evaluation by stakeholders. Tax codes of conduct relate to tax risks and substantive and procedural ethical norms. May be tax codes of conduct are a way to meet stakeholder needs with regard to tax in the current highly politicized and mediatised environment.

The phenomenon of cross-border pension benefits has gained exponential traction in recent decades, the assumed main causes being greater mobility among taxpayers, globalization, the blurring of borders within Europe, and technological advances that have made it relatively easy for people to settle permanently abroad following their retirement. From a tax perspective, one question that is relevant in this context is which country has the right to impose tax on pension benefits following emigration. In this article I will discuss what I believe to be an appropriate allocation of taxing rights for cross-border pension payments.

The contemporary tax landscape is experiencing a legitimacy crisis caused by macro-economic disturbances in the past decade, as well as numerous revelations in the media such as Swissleaks, Luxleaks and the Panama Papers. This crisis has resulted in people losing trust in their government and in corporations, thereby becoming more reluctant to give their share of money for redistribution. Why are states or collective institutions not able to generate the sufficient level of trust that would enable them to collect enough revenue? Who or what is responsible for the decline in trust? What are the key factors contributing to the decline in trust? Why do the levels of trust differ between states? Is this strictly a fiscal issue, meaning that we should search for the root of the issue only in the properties of tax systems and the differences between tax systems? Or are there institutional structures and political ideologies which differ from state to state that might be able to explain this difference? Written by experts in their field and with an interdisciplinary perspective Building Trust in Taxation analyses a topical issue which is integral to the development of society. Bruno Peeters is Professor of Tax Law at the University of Antwerp. His current research interests lie in legal principles, European and corporate tax law. Hans Gribnau is Professor of Tax Law at Tilburg University and at Leiden University. His research focuses on legal principles, tax governance, tax compliance and tax ethics. Jo Badisco is a doctoral researcher at the department of philosophy at the University of Antwerp. His current research is on the problem of international taxation which he approaches from a philosophical angle.

The international corporate tax system is considered a network. Just like for transportation, “shortest” paths are computed, which minimize tax payments for multinational enterprises when they repatriate profits. We include corporate income tax rates, withholding taxes on dividends, double tax treaties, and double taxation relief methods. We find that treaty shopping leads to an average potential reduction of the tax burden on repatriated dividends of about 6% points. An indicator for centrality in the tax network identifies the UK, Luxembourg, and the Netherlands as the most important conduit countries. Low-tax havens do not have a crucial role in reducing dividend repatriation taxes. By contrast, tax haven financial centres do. In the regressions we find that the centrality measures are robustly significant explanatory variables for bilateral FDI stocks. This also holds for our treaty shopping indicator.

The international tax system is the result of the interaction of different actors who share the responsibility for its integrity. States and multinational corporations both enjoy to a certain extent freedom of choice with regard to their tax behaviour – which entails moral responsibility. Making, interpreting and using tax rules therefore is inevitably a matter of exercising responsibility. Both should abstain from viewing tax laws as a bunch of technical rules to be used as a tool without any intrinsic moral or legal value. States bear primary responsibility for the integrity of the international tax system. They should become more reticent in their use of tax as regulatory instrument – competing with one another for multinationals’ investment. They should also act more responsibly by cooperating to make better rules to prevent aggressive tax planning, which entails a shift in tax payments from very expert taxpayers to other taxpayers. Here, the distributive justice of the tax system and a level playing field should be guaranteed. Multinationals should abstain from putting pressure on states and lobbying for favourable tax rules that disproportionally affect other taxpayers – SMEs and individual taxpayers alike. Multinationals and their tax advisers should avoid irresponsible conduct by not aiming to pay a minimalist amount of (corporate income) taxes – merely staying within the boundaries of the letter of the law. Especially CSR-corporations should assume the responsibility for the integrity of the tax system.

Using Dutch transaction-level data on international trade we find that the intensive margin drives Dutch trade growth year by year. After 6 years, new trade relations cover about 50 percent of Dutch exports. Each year 40 percent of the relations are new, but only 25 percent survives after two years. We distinguish several firm-country-product (FCP) relations characterised by the export familiarity of the firm, country or product to identify differences in survival rates. The estimates show that the hazard rates of trade relations with new exporting firms or incumbent firms to new countries are about 15 percent lower. EU membership decreases the hazard rate by 40 percent. Initial sales are also important. Relations with an initial export value of about 50 thousand euro do not survive, while those with an initial value of 200 thousand euro exist after a few years. Exports with homogeneous goods tend to have higher initial trade values and the hazard is about 10 percent lower than those with heterogeneous goods. Read also: De economist, juni 2015, Volume 163, Issue 2, pp 155-176

This special issue of JITC focuses on the globalization of trade in services and the effects on small open economies. It looks\n at a number of issues relating to international trade in services to re-evaluate the degree to which services are traded and\n tradable, the degree to which such trade is increasing, the implications of globalization and off-shoring and the policy responses\n required both to foster international integration in services and to react to the likely economic implications.

We explore the economic implications of the possible Turkish accession to the European Union. We focus on three main changes associated with Turkish membership: (i) accession to the internal European Market; (ii) institutional reforms in Turkey triggered by EU-membership; and (iii) migration in response to the free movement of workers. Overall, the macroeconomic implications for EU countries are small but positive. European exports increase by around 20%. Turkey experiences larger economic gains than the EU: consumption per capita is estimated to rise by about 4% as a result of accession to the internal market and free movement of labour. If Turkey would succeed in reforming its domestic institutions in response to EU-membership, consumption per capita in Turkey could raise by an additional 9%. These benefits would spill over to the EU.

The increasing importance of global supply chains has prompted the use of analytical tools based on trade in value added, because traditional trade measures (in gross value) cannot track the origin and destination of value added produced in different countries. This paper follows a recently created methodological framework for analyzing trade in value added, but extends it to identify the spokes and hubs in these global supply chains. In particular, we create indicators that measure the origin of value added which is redirected by hubs and the destinations of redirected value added. Using these indicators and the GTAP database for 2001, 2004 and 2007 we identify the importance of redirected value added and the hub and spoke relationships at the industry level.

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This CPB Discussion Paper addresses two policy questions with respect to public defined benefit (DB) pension schemes. Firstly, does a funded DB pension scheme increase welfare? Secondly, how large is the commitment problem of pension funds after an adverse capital market shock? This CPB Discussion Paper addresses two policy questions with respect to public defined benefit (DB) pension schemes: Firstly, does a funded DB pension scheme increase welfare? In other words: do the gains from intergenerational sharing of capital market risks outweigh the labour market distortions from pension schemes? Secondly, how large is the commitment problem of pension funds after an adverse capital market shock? The answer to the first question depends on the used welfare measure. If we use risk-neutral weights to aggregate the equivalent variations of different generations in different states of nature then a DB pension scheme is welfare increasing. If we use as weights the stochastic discount factors that corresponds to these states of nature, we conclude the opposite: a DB pension scheme reduces welfare. The probability that future households actually experience a welfare gain if the pension scheme is closed can be as large as 38 percent. So, a pure DB pension scheme has a large commitment problem: continuity will become at risk in case participation in the pension scheme is not mandatory. These results are most sensitive for the values of the labour supply elasticity, the risk aversion parameter and the mean and the standard deviation of the excess return on equity.

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Bij de behandeling van het Belastingplan 2013 is eigenlijk de formele start gegeven voor de herziening van het pensioen in eigen beheer. De toenmalige staatssecretaris van Financiën constateerde een groot verschil tussen de zogenoemde fiscale en commerciële waardering van het pensioen in eigen beheer. Deze verschillen leidden tot problemen in de praktijk, zoals bij het uitkeren van dividend, maar ook bij echtscheiding. Hij gaf toen aan, dat hij zou gaan kijken naar de mogelijkheden om de gevolgen van het huidige onderscheid tussen commerciële en fiscale waarderingsregels bij pensioen in eigen beheer te verkleinen. Het pensioen in eigen beheer stond niet ter discussie. Ook de nieuwste staatssecretaris van Financiën vond het van belang dat de door de directeur-grootaandeelhouder ingelegde middelen beschikbaar kunnen blijven voor (de financiering van) de eigen onderneming. Hoe anders kan het lopen.

In dit artikel wordt op hoofdlijnen ingegaan en wordt specifiek ingegaan op diverse losse eindjes in deze wet die voor de praktijk bijzonder van belang zijn.

In dit artikel bespreek ik 'Bouwstenen voor een beter belastingstelsel Tweede Kamer: gezondheidsgerelateerde belastingen'. Ik vat kort de opzet en resultaten van de analyse samen. Vervolgens beschouw ik de opzet van de bouwsteen die zoals zal blijken sterk leunt op de economische welvaartstheorie. Daarna beoordeel ik de resultaten van de analyse vanuit deze welvaartstheorie.

De aftoppingsgrens voor het opbouwen van pensioen – en overigens ook van lijfrente – ligt in 2020 op € 110.111. De aftoppingsgrens kan worden verlaagd naar bijvoorbeeld € 80.000 of € 60.000 . Dit is een van de beleidsopties in het op 1 mei 2020 verschenen rapport ‘Bouwstenen voor een beter belastingstelsel’. Echt verbazingwekkend is dat niet; van meet af aan werd vermoed dat de hoogte van de aftoppingsgrens op enig moment ter discussie zou komen te staan. De vraag is of een eventuele verlaging terecht is. In deze bijdrage wordt hier nader op ingegaan.

Tax avoidance is a concept that is not used in the Turkish tax legislation, and thus there is no legal definition of the term in the documentation. A number of other concepts are used though in order to explain or to refer tax avoidance such as tax veiling, sham, precedence of substance over form, abuse of the rights, escaping from tax and tax circumvention. The notion of preventing tax avoidance through a general regulation (GAAR) is provided. The application of this GAAR and consequences are discussed in the report.

De denktank heeft vier richtinggevende scenario’s ontwikkeld en uitgewerkt voor het organiseren van sociale zekerheid met differentiatie naar arbeidsvormneutraliteit en keuzevrijheid. Ieder scenario levert verschillende beleidsopties op ten aanzien van het verzekeren van de risico’s van ziekte, arbeidsongeschiktheid en langleven.

The case concerned the Swedish interest deductibility rules. In Sweden, interest payments are generally deductible. As an exception to this rule, interest payments made to an associated company are generally not deductible. Interest may be deductible, however, if the underlying debt is justified on commercial grounds. Interest payments between two Swedish associated companies are always deductible due to the intra-group financial transfer system. The ECJ had to decide whether or not the difference in treatment of interest payments made to other EU companies, in comparison to interest payments made to Swedish companies, can be justified by overriding reasons in the general interest. The ECJ held that the Swedish rules were not compatible with the freedom of establishment. It held that the different treatment could neither be justified by the need to fight tax evasion and tax avoidance nor by the need to maintain a balanced allocation of the power to impose taxes between the Member States. In addition, the Court also stated that even if the transaction in question represents a purely artificial arrangement, the principle of proportionality requires that interest payments that are in line with the arm’s length principle must be deductible. The decision is of particular interest as many EU Member States have introduced similar interest deductibility rules. Further, it is of interest in respect of the proposed source state rules under the OECD’s Pillar Two Blueprint. [2.]

This article describes the newly introduced approach of Cooperative Compliance of the European Union, the European Trust and Cooperation Approach. It also critically compares that programme with the OECD’s International Compliance Assurance Programme and with the pillars of Cooperative Compliance.

The General Court decisions in Ireland v. Commission and Apple v. Commission (Joined Cases T-778/16 and T-892/16), [1.] given on 15 July 2020, follow the Court’s earlier decisions in the Starbucks (Joined Cases C-760/15 and T-636/16) [2.] and Fiat (Joined Cases T-755/15 and T-759/15) [3.] cases concerning the legality of EU Commission decisions considering certain transfer pricing rulings granted by Member States to multinational enterprises to be prohibited State aid. The General Court reached a balanced verdict: while agreeing with the Commission on the fundamental point regarding the applicability of the arm’s length principle to Member State tax rulings, it concluded that the Commission had failed to apply that principle in a manner that proved a selective advantage had been granted by the Irish revenue authorities. The Commission has lodged an appeal against the General Court’s decision before the Court of Justice of the European Union (Case C-465/20 P). This statement focusses on questions of law addressed by the General Court rather than going into detail on the factual/transfer pricing (TP) issues. It focusses, in particular, on the extent to which the Apple case provides clarifications or reveals changes in approach relative to the General Court’s earlier decisions in Starbucks and Fiat .

This is an Opinion Statement prepared by the CFE ECJ Task Force1 on the MK v Autoridade Tributária e Aduaneira case, in which the First Chamber of the Court of Justice of the EU (ECJ) delivered its decision on 18 March 2021,2 which deviated from the Opinion delivered by Advocate General Hogan, on the 19 November 2021.3 In MK, the Court confirmed its previous case law and held that the Portuguese (optional) regime for taxation of capital gains from immovable property of non-residents was contrary to the free movement of capital under Article 63 TFEU since non-residents were taxed less favourably than residents. The fact that the domestic system provided an election for non-residents to be treated as residents was not sufficient to consider the rule as compatible with EU Law.

This is an Opinion Statement, submitted to the EU institutions in May 2022, of the CFE ECJ Task Force on Commission v. Spain (Case C-788/19) (also cited as the Form 720 case), in which the First Chamber of the Court of Justice of the European Union (ECJ) delivered its decision on 27 January 2022. The Court, in its decision, ruled in favour of the action brought by the Commission and did not fully follow the reasoning of Advocate General Saugmandsgaard Øe in his Opinion of 15 July 2021, who proposed only partially accepting the action brought by the Commission. The Court held that the Kingdom of Spain had failed to fulfil its obligations under article 63 of the Treaty on the Functioning of the European Union (TFEU) (2007) and article 40 of the EEA Agreement (1992) [4.] by imposing disproportionate measures on the failure to duly comply with the obligation to provide information concerning assets and rights located abroad. The Spanish legislation provided for very serious economic consequences, such as the taxation of the value of not duly declared assets and rights as unjustified capital gains with no limitation period. The legislation also provided for a proportional fine of 150% of the tax calculated on amounts corresponding to the value of those assets or those rights, which could be applied concurrently with flat-rate fines. At the same time, such flat-rate fines were much higher than the penalties imposed in respect of similar infringements in a purely national context, which were not capped. Commission v. Spain is an important case, as it addresses a number of relevant issues regarding the limits that the Member States must respect when implementing measures to counteract international tax avoidance and evasion.

Both the OECD Model Tax Convention on Income and Capital (OECD Model) and the United Nations Model Double Taxation Convention (UN Model) are designed as a tool for legislative harmonization and therefore often serve as a basis for tax treaty negotiations between different jurisdictions worldwide. At the same time, however, interpretation of a particular tax treaty provision may still differ from country to country due to a number of reasons. The risk of double/multiple (non-) taxation is therefore not entirely removed, and this will adversely affect the international exchange of goods and services and movements of capital, technology and persons. In order to increase a uniform interpretation of tax treaties worldwide and, hence, reduce the risk of double/multiple (non-) taxation, basic knowledge is needed on how various tax treaty issues are resolved by different jurisdictions. It is widely known that a unified approach to interpretation and application of international tax treaty rules may benefit not only the countries/parties to a certain tax treaty, but also their taxpayers, as well as international trade and investments in general. This topic is therefore an ongoing concern for many tax practitioners, representatives of international organizations and public officers and tax scholars. The “Tax Treaty Case Law around the Globe” conference was held at WU (Vienna University of Economics and Business) on 6-7 May 2021. This international event took place for the ninth time and was jointly organized by the Institute for Austrian and International Tax Law of WU and the European Tax College of Tilburg University. The conference was dedicated to the analysis of the most important cases on international tax treaty law decided in 2020 in different tax jurisdictions worldwide. Thirty cases were presented by outstanding tax experts from 22 different countries. Each presentation was followed by an intensive and fruitful discussion. The participants of the conference compared the interpretation approaches existing in both OECD and non-OECD member countries and came up with comprehensive conclusions and suggestions. The main scientific results of the conference are presented in this book. Each report in this book is dedicated to a court case or a number of cases on a particular article of the tax treaty at issue (often based on the OECD or UN Model) which was decided in a certain jurisdiction in 2020. Every report is structured in a similar way: the facts of the case, the decision and reasoning of the court and the observations and conclusions of the authors, including the possible impact of the decision on international tax law development in the respective country and other jurisdictions, are presented. This clear and concise structure enables a solid and accessible overview of the global case law on tax treaty application in 2020. The systematic structure of each report allows for different tax treaty case law to be studied and compared in a comprehensive and efficient way. The editors believe that the reports presented in this book are of high value and will therefore be of particular interest for tax consultants, public officers, academics and all those interested in international tax law. The fact that many domestic decisions are otherwise available only in a national language makes the materials contained in this book even more valuable.

In China, VAT exemption has been used as a tax incentive for supporting small and low-profit enterprises (SLEs) in recent years, aimed at reducing their tax burden. However, according to the principle of proportionality, VAT exemptions may not be the most suitable measure for supporting SLEs. The author analyses the validity, necessity, and balance of VAT exemption for SLEs as a tax incentive, suggests optimization options, and offers further thoughts on the regulation of tax incentives in China.