|Daniel Herde||Inger Camilla Gjeruldsen|
Last year the Ministry of Finance (MoF) appointed professor emeritus Zimmer to evaluate certain aspects of the current non-statutory general anti-avoidance rule (GAAR) and propose a statutory GAAR. This proposal has now been published (NOU 2014:13) and sent out for public consultation. The evaluation of the GAAR is following up on one of the recommendations put forward by the Scheel tax commission.
Under the existing rule, transactions may be reclassified for tax purposes if: (i) the main motive is to reduce Norwegian taxes; and (ii) if, after an overall assessment of several factors (for example, business reasons, artificiality, and so on) it is concluded that the outcome breaches the objective of the specific tax rule. In the mandate from the MoF, Zimmer was asked to specifically consider three features of the current rule which he previously has criticised in articles, and elsewhere. Not surprisingly, the proposed new statutory rule seeks to remove these features.
The first feature is the relevance of foreign tax savings. This has been accepted as a business reason by the Supreme Court (in a case where Zimmer as temporary appointed judge was one of two dissenting judges). The second feature is the main motive test, which assesses the taxpayer's actual motivation for carrying out a transaction. Zimmer proposes that this test is more objectivised and generalised, and that the motive(s) has to be deduced from the objective facts in the case and not necessarily from what the taxpayer is presenting as its actual motives. The last feature concerns situations where the MoF has commented on a possible anti-avoidance situation in the preparatory works to a law without proposing any measure against such situation. This has, in some Supreme Court judgments, been seen as an acceptance of a loophole in the rules which cannot be rectified by using the non-statutory GAAR. If the proposed rule is adopted, such statements should no longer prevent the application of the GAAR.
We anticipate that stakeholders will provide comments to the proposed rule. The proposed rule is intended for all types of taxes, direct and indirect, in addition to duties. This could be seen as an extension of the GAAR, which until now has been used in income tax cases and inheritance tax cases. It is also debatable whether there is a need to extend the GAAR to other types of taxes, especially duties where there has been no evident need for such rule. The proposed rule may also create challenges for cross-border reorganisations. If the main motive is a foreign tax benefit and such benefit is disregarded, any Norwegian tax benefit, unintended or limited compared to the foreign tax benefit, may be challenged under the proposed rule due to the lack of other sufficient business reasons.
Zimmer's predecessor, professor Aarbakke, carried out a similar exercise in 1991, which was abandoned after the public consultation. It is not clear that this proposal provides a more appropriate rule than the current GAAR developed by the Supreme Court. In its most recent judgments, the Supreme Court has limited the ambit of the GAAR, which has seemingly reduced the application of the rule. If the proposed rule is adopted it is likely that the use of the rule will increase – to the detriment of the taxpayers that are chosen out in pilot cases.