Tax Avoidance and the European Court of Justice: What is at Stake for European General Anti-Avoidance Rules? Professor Violeta Ruiz Almendral, 1 Tax and Finance Law, Universidad Carlos III de Madrid Tax shelter: `a deal done by very smart people that, absent tax considerations, would be very stupid' (Michael Graetz) 2 1. Introduction Spain has recently introduced a new general anti- avoidance rule 3 (GAAR) that presents many simila- rities with other existing GAARs and anti-avoidance judicial doctrines. But these are harsh times for such rules. While on the one hand the present context of growing globalisation offers an ever greater panoply of opportunities for tax planning, on the other, many anti-avoidance measures have been the target of certain decisions by the ECJ, on the grounds that they put the correct functioning of the EC fundamental freedoms in jeopardy. It is then pertinent to reflect upon the meaning of GAARs, taking into account the European context, and especially the ECJ case law on this matter, which apart from having a growing incidence in the design of the taxes in the EU, is increasingly penetrating the core of the definition of tax avoidance. Implementing any measure that limits the possibi- lities of tax planning in any way, especially if it is a GAAR, is usually welcomed with much discussion. Passion is not unknown to the Spanish character, and the reform has been received with a mixture of serious tax debate and misconceptions about what exactly the role of taxes should be. Interestingly, the terms of the discussion do not greatly differ from the debate that has taken place in other countries. 4 This is hardly surprising, as there is a high level of coincidence among most existing GAARs. As I will later show, the Spanish GAAR shares many features with the German rule (s. 42.1 Abgabenordnung (AO)), but does not greatly differ, in its core, from the Australian or the Canadian rules, or for that matter, from the main lines of tax avoidance case law in the US, Canada, Australia or the UK. Technically though, the new Spanish GAAR is really not that new. There have been other GAARs in the past, since the enactment of the General Tax Code of 1963 (Ley General Tributaria (LGT)). The `added value' of this new provision is to try and revitalise its use by the tax administration and the courts, by defining avoidance in a much clearer manner, thus serving as a more reliable guideline for the rechar- acterization of arrangements that fall within its scope. In this article I will first convey the general aspects of a GAAR and anti-avoidance doctrines, connecting their main features with the new Spanish provision, and secondly, I will assess the pertinent ECJ decisions and how they may affect its understanding and its use in the European context. Finally, I will pay special attention to a recent Opinion of Advocate General Mr. Poiares Maduro, that implies a certain change in the tradicional ECJ doctrine. Notes 1 The author would like to thank Professor J. M. CalderoÂn Carrero (Universidad de La CorunÄa) for his valuable comments on the first manuscript, which have considerably improved the final text. Needless to say, the author remains accountable for all remaining errors. 2 As quoted by Tom Herman, Tax Report, Wall Street Journal, 10 February 1999, p. A-1. 3 Section 15 of the Ley 58/2003, General Tributaria, the General Tax Code that replaces the previous one, contained in Ley 230/1963, General Tributaria. 4 Compare the critic of Brian Arnold, `The Canadian Anti-Avoidance Rule', British Tax Review 1995, no. 6, pp. 549, 553 and 554 (including footnotes ns. 31, 41 and 46), to Colin Masters, `Is There a Need for General Anti-Avoidance Legislation in the United Kingdom?', British Tax Review 1994, no. 6, who is contrary to the introduction of a GAAR, with the critics of Palao, `EconomõÂa y Derecho en la aplicacio n de las leyes tributarias', Cro Ânica Tributaria 1995, no. 73; `Existe el fraude a la ley tributaria?', Revista Estudios Financieros 1998, no. 182; `La norma anti-elusioÂn del proyecto de nueva ley general tributaria', Revista Estudios Financieros 2003, no. 66 to the opinions of FALCO  N and Tella, `El fraude a la Ley tributaria como un mecanismo para gravar determinadas economõÂas de opcio n (I): su radical diferencia con los supuestos previstos en el art. 6 C.C.', Quincena Fiscal 1995, no. 17; `El fraude a la Ley tributaria como un mecanismo para gravar determinadas economõÂas de opcioÂn (II): lõÂmites a la utilizacioÂn de esta figura', Quincena Fiscal 1995, no. 18 and Juan Jose Lapatza Ferreiro, `EconomõÂa de opcioÂn, fraude de ley, sanciones y delito fiscal', Quincena Fiscal 2001, no. 8, who are also contrary to such a norm. The resemblance of all the arguments pro and con are stunning, as different as the Spanish and the Canadian tax systems may be. See similar arguments in the reactions to the UK GAAR proposal put forward by the IFS, Tax Avoidance: A report by the Tax Law Review Committee (IFS, 1997), at Graeme Cooper, `International experience with general anti-avoidance rules', Southern Methodist University Law Review 2001, no. 83. ARTICLES INTERTAX, Volume 33, Issue 12 # Kluwer Law International 2005 560 BookEns Journal: TAXI PIPS No.: TAXI2005090 & LE & CP & TYPESET & T DISK