tax notes international - Tuck School of Business - Dartmouth College

occur when the national antiabuse rules are general in
nature. The ECJ stated that it could not be claimed
that there was such abuse when an undertaking hired
assets out for remuneration to another undertaking that
used them primarily in other member states, highlighting,
in particular, that that hiring out ‘‘cannot be the
basis of a general presumption of abusive practice and
justify a measure which compromises the exercise of a
fundamental freedom guaranteed by the Treaty.’’ This
key flaw in the design of many member states’ tax
antiabuse rules is apparent from the ECJ’s jurisprudence,
including the Austrian rules in this case.
Burden of Proof
Clearly, the burden of proof in the area of tax abuse
should remain on the tax authorities, at least until they
make a prima facie case that the abuse exists. However,
this is rarely the case when the antiabuse rules are
drafted in a general way to include situations like those
seen in Jobra, where no apparent abuse was happening.
The ECJ dealt with this issue for the first time in Jobra
when it commented that ‘‘the legislation at issue affects
every lessor eligible for the investment premium which
hires out assets for remuneration to undertakings carrying
out cross-border activities, and does so even where
nothing points towards the existence of such an artificial
arrangement.’’
The requirement that some evidence pointing toward
the existence of wholly artificial arrangements or
abuse should exist may be helpful to taxpayers facing
antiabuse rules in the future as, clearly, they can advance
the argument to the tax authorities that the
ECJ’s ruling in Jobra specifically mentioned that there
is an onus on the tax authorities to at least demonstrate
that something abusive is occurring. This is an
additional part of the tax authorities’ burden of proof
before the burden gets transferred over to the taxpayer
to show that no abuse is taking or has taken place.
The ECJ, following the reasoning of its earlier tax
avoidance case law, goes on to make it clear that in the
circumstances of this case, the Austrian rules do not
allow lessors ‘‘to adduce evidence that no abuse is taking
place.’’ The consequences of this are significant
because the taxpayer is never given the opportunity to
rebut the allegation of abuse. Perhaps more importantly,
as a result, the ECJ found that the Austrian tax
rules at issue do not make it possible to limit the refusal
to grant the investment-premium tax advantage to
cases involving wholly artificial arrangements, which
indicates that the rules go too far and are a disproportionate
restriction on the fundamental freedom to provide
services.
Protective Nature of the Austrian Rules
Finally, it is useful to highlight the protective nature
of the Austrian tax rules at issue in Jobra. Article 49 of
the EC Treaty precludes such rules because their aim
was to provide tax advantages mainly for Austrian residents
who leased assets to other Austrian residents
who used the leased assets mainly in Austria. In an
internal market, it is clear that such rules seriously
hamper cross-border trade and economic activity, and
the provision of leasing services in particular, because
the tax advantage is limited to Austrian lessors and
lessees who lease assets for mainly Austrian domestic
use purposes.
With many leasing companies providing services
cross-border, Jobra may be one of the ECJ’s most significant
preliminary rulings in the area of cross-border
leasing, on a par with its earlier judgment in Eurowings
(C-294/97), in which German tax rules that penalized
a German company for obtaining its leasing services
from an Irish company came under scrutiny and were
found to be incompatible with the freedom to provide
(and to receive) services as set forth in EC Treaty article
49.
In the eyes of the ECJ, protectionist rules of this
nature have no place in an ‘‘area without internal frontiers.’’
Although direct taxation remains within the
competence of the member states, the exercise of that
competence when the member states design their tax
systems must take place in full compliance with EU
law. In this case, the protectionist Austrian tax rules
will have to be either amended (to ensure compliance)
or repealed.
♦ Tom O’Shea, Queen Mary University of London, Centre
for Commercial Law Studies
Germany
GERMANY
Former Deutsche Post CEO Convicted
Of Tax Evasion
A German court on January 26 convicted Klaus
Zumwinkel, former CEO of Deutsche Post and the
most prominent German taxpayer to be caught up in
the Liechtenstein tax scandal, of tax evasion, according
to media reports.
The Bochum court reportedly handed down a twoyear
suspended sentence and fined Zumwinkel €1 million
(about $1.3 million).
The fine and two-year suspended sentence was what
prosecutor Gerrit Gabriel called for in his closing remarks,
according to a January 26 Associated Press report.
‘‘He knew exactly what he was doing,’’ Gabriel
was quoted as saying.
Gabriel requested a relatively light sentence (conviction
of tax evasion can lead to up to 10 years in prison
under German law) given that Zumwinkel has paid
€3.9 million (about $5.1 million) in back taxes and
TAX NOTES INTERNATIONAL FEBRUARY 2, 2009 • 393
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