Sample Solution

its anti-abuse case law. Although Halifax formed a appeared to accept the prohibition of abuse of EU law as a general principle, the Court did not characterise the prohibition as such.

The Court did not make the pivotal distinction between two anti-abuse doctrines. The first of these entails prohibiting tax advantages when tax considerations were the only way to determine the taxpayer’s legal behaviour and there was no other credible explanation based on objectively ascertainable facts. The second involves a doctrine in which tax considerations may be the principal (or one of the principal reasons) for explaining the taxpayer’s behaviour. In failing to make this distinction, the Court is seen to interpret the rule of “principal” or “one of the principal” tax reasons as formulated in Article 11 of the Directive as the expression of the “one and only” doctrine of Cadbury Schweppes.

The Court then essentially gave the power of decision making back to the national court. By doing this, it left open the possibility for the national courts to control how the anti-abuse doctrine applied. This in turn gave the Directive provision a “reverse vertical direct effect”; it allowed the Member State to rely on it against an individual without transposition.

5.4 Acceptance as an overriding principle of EU law
Halifax and Koefed provide the framework provide a clear acceptance of the principle of abuse of EU law as a general principle. Thus,

5.5 The influence of Halifax in direct taxation: Cadbury Schweppes and “wholly artificial arrangements”
Cadbury Schweppes (CS) became the paradigmatic example of the difficulties Member States come up with in order to preserve traditional fiscal systems in a common market contest. Even though CS concerned cross-border issues and the fundamental freedom of establishment, the Court effectively imported the Halifax test, albeit with slight differences.

In CS, a company from the United Kingdom had set up a subsidiary in Ireland, for the purpose of taking advantage of Ireland’s attractive corporate tax rate, which was substantially lower than that found in the UK. The United Kingdom subsequently applied its tax charge upon the profit made