Abuse in GloBE: Legal and Policy Challenges

What the paper says

This article analyses how “abuse of law” is dealt with in the Global Anti-Base Erosion (GloBE) system and, in particular, in its implementation in the European Union (EU) through the Global Minimum Tax (GMT) Directive. Although the GloBE architecture contains a dense set of specific anti-avoidance rules (SAARs), it omits a general anti-abuse rule (GAAR). That design choice creates structural tensions: first, between certain mechanically operating SAARs and EU primary law (notably the fundamental freedoms) and, second, between the objective of uniform, predictable minimum-tax outcomes and the potentially heterogeneous application of pre-existing GAARs doctrines. The article focuses on the intra-group financing arrangements rule (article 3.2.7 of the GloBE Model Rules/article 16(8) of the GMT Directive), arguing that its automatic, inherently cross-border logic is liable to restrict the freedom of establishment and may raise questions even under the deferential “manifest error” review of EU secondary legislation of the Court of Justice of the European Union (CJEU). It then examines whether GAARs can fill perceived gaps de lege lata, concluding that the EU Anti-Tax Avoidance Directive (ATAD) GAAR cannot be extended to GloBE top-up taxes and that reliance on domestic GAARs would jeopardize coherence, legal certainty and uniform application across jurisdictions. The article therefore characterizes GloBE largely as a self-contained system, while advocating de lege ferenda for a narrowly framed, purely objective, GloBE-specific GAAR to address residual avoidance scenarios without undermining administrability or cross-border consistency.