Abstract

This article considers how supranational courts and tribunals approach state measures that are meant to address artificial tax arrangements. It undertakes this analysis based on decisions chosen from three different legal regimes notably Cairn v. India (international investment law), Commission v. Ireland/Apple (EU law), and Yukos v. Russia (European Court of Human Rights). In each of these cases, the state (or the European Commission) addresses alleged tax avoidance by what taxpayers believe are retroactive actions. The article offers three main contentions. First, it takes the view that taxpayers cannot legitimately expect states not to act against tax avoidant arrangements and artificiality, also if such arrangements are considered legal. Secondly, measures addressing tax avoidance inevitably involve some form of retroactivity, because taxpayers do not engage in an arrangement that is not going to work under known tax rules and practices. Thirdly, state measures against tax avoidant arrangements, particularly given their unavoidable retroactive element, are addressed by international norms. Although each supranational court and tribunal will approach these questions from the perspective of its proper legal regime, there is substantial convergence that state measures to curb tax avoidance must be reasonable, non-arbitrary and proportional.