This thesis addresses Art. 4 ATAD and looks at it from two different angles. Firstly, Art. 4 ATAD will be examined in the light of the TFEU freedoms. Special regard will be had to the principle of proportionality. Secondly, it will be evaluated how Art. 4 ATAD, or rather its domestic implementation, aligns with the constitutions of the Member States. For the first part, Art. 4 ATAD has to be measured against the case law the ECJ has developed regarding testing anti-avoidance rules against the TFEU freedoms. An interest limitation rule like Art. 4 ATAD falls under the scope either of the freedom of establishment or the free movement of capital. However, since Art. 4 ATAD applies to cross-border interest payments in the same way as it applies to such payments on a purely national level, it does not impose a restriction on any of the freedoms. Since Art. 4 ATAD is not a domestic rule, which is tested against the TFEU freedoms, but EU law, it still has to follow the proportionality principle according to Art. 5 (1) TEU. For this reason, the proportionality test, which usually forms part of the justification test, still has to be conducted on its own. Art. 4 ATAD has to be suitable for securing the attainment of the objective which it pursues without going beyond what is necessary to attain it. As the name of the ATAD implies, its main objective is preventing tax avoidance. Regarding this justification ground, the ECJ has developed two different lines of judicature. The first line involves the anti-avoidance purpose on its own. Then, the given measure has to target wholly artificial arrangements, which do not reflect a real economic activity. Moreover, the taxpayer needs to be given the chance to prove such an economic reality. Art. 4 ATAD does not meet these requirements, because it covers all sorts of interest payments and does not provide for an exception in case of a proven sound business reason. The second line considers the anti-avoidance purpose combined with another justification ground. Then, the provision does not have to target only wholly artificial arrangements. Here, the balanced allocation of taxing rights is suitable for this purpose. Nevertheless, the problem still remains that Art. 4 ATAD is not limited to cross-border interest payments, but covers all kinds of interest payments and therefore overshoots its aim of securing the balanced allocation of taxing rights. This is why this justification ground is not able to render Art. 4 ATAD proportionate either, neither combined with the anti-avoidance purpose nor taken on its own. Art. 4 ATAD in not in line with the TFEU freedoms, because it violates the principle of proportionality, which is part of the justification test. For the second part, Art. 4 ATAD has to be measured against national constitutions. As an example serves the German interest barrier rule. This is, because it served as a blueprint for Art. 4 ATAD, so it can be seen as already implementing Art. 4 ATAD. Furthermore, the German interest barrier rule is currently under review by the German Constitutional Court, because its constitutionality is being questioned. The reason for this is that by limiting the deduction of interest expenses, the German interest barrier rule interferes with the objective net principle. In German tax law, the objective net principle is deduced from the ability-to-pay principle, which again is deduced from the principle of equality. The principle of equality is laid down in Art. 3 (1) of the German Constitution. Through the connection to the principle of equality, the objective net principle itself is covered by the German Constitution. This derogation from the objective net principle is not justified, because the German interest barrier rule - like Art. 4 ATAD - is not proportionate in relation to its objectives, i.e. the control of economic policy, the state's financing needs and the need to prevent abusive structures. The same problem would occur with an actual domestic implementation of Art. 4 ATAD. In case, the objective net principle is also covered by the constitutions of other EU Member States, they will face the same difficulties. Even if the objective net principle is not covered by the constitution of a Member State, it still is a fundamental principle of tax law. It is true, that EU law prevails over domestic laws and even national constitutions. However, according to Art. 4 (2) and (3) TEU, the EU also has to respect the national fundamentals and follow the principle of sincere cooperation. This means, that the EU should not counteract such fundamental principles of the Member States as the objective net principle and the ability-to-pay principle. By adapting Art. 4 ATAD, the EU does not meet these requirements. It can be concluded that Art. 4 ATAD results in difficulties both with primary EU law and with national constitutional law or at least fundamental principles. Although these concerns are rather of a theoretical nature, they still lead to the legitimate question if the EU legislators have made the right choice in phrasing Art. 4 ATAD as they did.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-352526 |
| Date | January 2018 |
| Creators | Meyer im Hagen, Caroline |
| Publisher | Uppsala universitet, Juridiska institutionen |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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