Facing the increasing abuse of legal norms by some taxpayers who seek to obtain undue tax advantages, by means of behaviors aimed only at evading tax compliance, the legislator has taken the determination to confront tax avoidance and effectively protect the fiscal interests through the progressive incorporation of anti-avoidance clauses in Latin American tax law.

Except for some exceptional cases, such as Argentina and Uruguay, the inclusion of anti-abuse measures in the South American tax legislation is a relatively new phenomenon, and it is an important step, not only to ensure compliance with the tax obligations by the taxpayers, but also to position the Ibero-American tax laws at the forefront of the fight against tax evasion.

Indeed, the Ibero-American tax regulations coincide with the international efforts recently developed by the Organization for Economic Co-operation and Development (OECD), to fight tax avoidance in the internationally known “Action Plan against Tax Base Erosion and Profit Shifting “(BEPS), as well as the latest version of the Model Tax Code published by CIAT in 2015, which includes in its article 11 a general anti-avoidance clause.

In this context, and given the importance of the implementation of this new regulation for the Tax Administrations, it is important to identify and analyze the comparative legislation, and at the same time to study the Spanish and European experience, so that the anti-abuse clauses have an effective application in the rest of the countries of the region.

However, any work that seeks to study tax avoidance should begin with analyzing and studying the principle of the autonomy of the will, which, in tax law science, is represented by the concepts of tax mitigation option and tax planning.

Thus, it is important to emphasize that, not only the explicit tax mitigation option, i.e. those expressly recognised by tax legislation, are the only ones permitted and accepted by the tax legal system, but also those implicit tax mitigation options, i.e. those which find their source directly in the principle of the autonomy of the will. In this sense, denying this freedom would be ignoring those fundamental and constitutional principles that direct the taxpayers’ actions. Indeed, based on the study and analysis of the legal systems addressed in this work, we found that, both the doctrine, and the legislation and the compared jurisprudence recognize the freedom that taxpayers have to organize their businesses, which must also be respected by the administrations in their verification and control work.

However, and as in private law, the private autonomy of the person also has its limits. Thus, there are constitutional limits that must be respected in tax law, both by the administration and by the taxpayers, in particular with regard to the principles of legality, of tax equality and of economic capacity. In this way, it is not permissible for the administration to create new taxable facts other than those described in the law, nor is allowed for the taxpayer to artificially evade a taxable fact described in the law that he has indeed performed.

This is already called the “norm of conflict” in Spain, “abuse of legal forms” in Germany, “abuse of law” in France, “theory of new realism” in the United Kingdom, “doctrine of the substance over the form” in the United States or “economic interpretation criterion” in most of South America. All these theories, doctrines and norms have in common to make the reality prevail over the appearances, above the deception and, at the end of the day, to enforce the principles of legality and equality in tax matters.

Yes, it is important to underline that the topics exposed in this work are not easy to analyze, but instead require an understanding and more study than any other topic of tax science, especially because there are constitutional principles involved, such as legal certainty and corporate freedom, as well as the case development that tax avoidance represents in contemporary tax law.

In this way, the great challenge for the tax law enforcer will be to identify when we deal with tax mitigation and legal tax planning and when we face abusive behaviors, so the analysis of the aggressive tax planning schemes will constitute the main objective of the contemporary examination processes. However, for the tax law the concept of “aggressive tax planning” does not exist, but it is either a legal tax mitigation option, or it is tax planning, or, if not, it is an abusive behavior covering abusive operations, and in the latter case, the tax administrations will have the burden of proving that the acts, contracts, operations and businesses of taxpayers are abusive, respecting at all times the taxpayers’ rights.

This post is a summary of the award-winning paper of the VII edition of the CIAT/AEAT/IEF Research Scholarship.

Title: Los retos en la aplicación de las Cláusulas Antiabuso por las Administraciones Tributarias Latinoamericanas y las lecciones de las Experiencia española y Europea.    (Spanish only)    

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