Justifications and Proportionality: An Analysis of the ECJ’s Assessment of National Rules for the Prevention of Tax Avoidance

The article deals with the limitations imposed by the free movement provisions of the Treaty on the Functioning of the European Union (TFEU) on Member States' ability to prevent tax avoidance and protect national tax bases through law. It focuses on some recent case law developments in the Court of Justice of the European Union (ECJ). Among other changes, a significant reason for justification has been added and the proportionality test has been elaborated. Conclusions regarding the development in case law during the last few years will be contrasted with the statements made in previous case law, namely that provisions that do not only apply to wholly artificial arrangements cannot be justified with reference to the need to combat tax avoidance. One central question concerns the implications of the current legal situation for Member States' tax legislators' ability to prevent tax avoidance and to protect their national tax base. The implications of this development for the EU compatibility of the Swedish General Anti-Avoidance Rule (GAAR) and the rules for the limitation of interest deduction are analysed. The article also discusses the case C-318/10 SIAT.