The inconsistent use of (tax) terminology in drafting / enacting legislation and communicating issues re: perceived tax abuse, developing specific/targeted/general anti-avoidance rules (SAAR, TAAR, GAAR), anti-abuse rules, etc. promotes subjectivity, uncertainty, and misguided perceptions in trying to understand complex legal and technical international tax laws and regulations.
The recently drafted anti-abuse rule in the EU Parent-Subsidiary Directive (attached link for reference) is designed as a minimum standard to be adopted by EU Member States. Article 1, paragraph 4 of the Directive states “This Directive shall not preclude the application of domestic or agreement-based provisions required for the prevention of tax evasion, tax fraud or abuse.” This language should be compared to other tax legislation that introduce additional subjectivity and confusion with undefined and misunderstood terminology.
Subjective terminology that accompanies undefined verbiage as a basis for tax laws and regulations, such as anti-avoidance / abuse rules, further complicates comprehension, application, interpretation, and assessment of complex international tax rules.
The phrases “tax evasion” and “tax fraud” clearly set forth bright legal lines for definition and enforcement, whereas inherently subjective phrases of “tax avoidance,” “aggressive tax planning,” “intent of Parliament”, “tax abuse,” and similar terminology result in additional uncertainty for deciphering the true intent of significant tax legislation.
It would be beneficial to recognize the inherent inconsistencies of terminology applied in tax laws and regulations, and commence inclusion of verbiage and definitions that provide clarity promoting consistent application, implementation and enforcement of international tax guidelines.