A Study On The Legal Questions Concerning General Anti-tax Avoidance Rules

To distinguish the boundary line between tax avoidance and tax planning has been a difficult problem for tax law and practice.The task of anti-tax avoidance is to establish a tax avoidance activity and,based on which,to adjust its tax consequences.Theoretically,tax avoidance is such behaviour that conflicts with the purpose of tax law,while in practice,whether or not a taxpayer has a business purpose is often used in many countries including China as the criterion to establish if a certain behaviour constitutes tax avoidance.Proper importance has not been attached to the analysis on the legislative purpose.In China,the general anti-avoidance rule("GAAR")is seen as empowering the tax authority to fill tax loopholes,having its legal basis founded on the Ability to Pay Principle.However,such empowerment without any restriction will shake the very core of legislative supremacy Absent concrete application rules,the tax authorities in our country exhibit strong tendency of nationalism when applying GAAR to adjust tax consequences.The first chapter sketches the concept and the elements of tax avoidance,points out that tax law deficiency is the legal root for tax avoidance and analyzes the particular feature of tax law deficiency by contrast to law loopholes,as well as the different types of tax law deficiency and forms thereof.This part also enunciates the two major types of tax avoidance behaviours,i.e.circular transactions and linear transactions,as well as the different analytical approaches for the two.These analysis serves as preparation for articulating the theories on tax avoidance identification and tax consequence adjustment in subsequent chapters.This part further outlines the different theoretical basis and methodology for general tax-avoidance regulation in civil law countries and common law countries.The first sub-chapter of the second chapter enunciates in details the criterion of tax avoidance,the subject of and the method for teleological interpretation in tax avoidance scenario,gives an in-depth analysis on the functions of and the relations between the business purpose and the tax law purpose in the identification of tax avoidance behaviours,and summarizes the different functions of each constituting elements of tax avoidance.The second sub-chapter studies the necessity as well as the restrictions of the empowerment to the tax authority to fill tax loopholes by means of GAAR from the perspectives of theory and policy.The third sub-chapter outlines the different approaches adopted by the civil law countries and common law countries,in particular the US Economic Substance Doctrine,the Step Transaction Doctrine and the UK Ramsay Principle are introduced,and finally summarizes the general approaches for the application of GAAR.The third chapter,by taking the specific type of case,i.e.indirect transfer of equity of resident enterprises by non-resident enterprises as the subject of study,outlines the legislation and the administrative and judicial practice concerning such case in China,analyzes one typical case in China by applying the approaches proposed in the second chapter,and finally makes suggestions on the improvement of legislation concerning China's EIT GAAR and its implementing rules,IIT GAAR as well as the tax provisions concerning indirect transfer of equity by non-resident enterprises in China.