The Concept of Abuse of Law in European Taxation: A Methodological and Constitutional Perspective

Abstract

In two recent cases “T Danmark” and “N Luxembourg 1” the European Court of Justice delivered landmark judgments on the impact of the concept of “abuse of law” in the area of taxation. In these judgments the Court promoted the recurrent notion that “European law cannot be relied up-on for abusive or fraudulent ends” to the rank of a “general principle” of European law in matters of direct taxation. This has a profound effect on the legal framework for taxpayers and tax authorities as such a “general principle” has the power to override both secondary EU law and national tax legislation. According to the Court, it has to be applied irrespective of conflicting provisions in EU tax directives and without any explicit basis under domestic tax law. This article, which has been written to celebrate Professor Judith Freedman on the occasion of her retirement at Oxford University, challenges the findings of the Court, which create confusion and uncertainty both from a methodological and a constitutional perspective. This article proposes to recognize a concept of “abuse of law” at the level of secondary EU law, thus leaving the hierarchy of norms under European law and the interaction between EU law and national legislation intact.