Abstract
This paper points out the proliferation of the abuse of law concept into tax law. We can see this tendency in both Czech and international law in both case law and legislative work.
The aim of this paper is to identify the significance of the abuse of law principle in the area of tax law. In the first part of my paper, I focus on the subjective criterion of abuse of law.
The second part concentrates on the significance of the objective criterion, and on the relationship between the two criteria. It is my conclusion that transactions which may appear as irrational, artificial or purposive should all be considered within the context of the meaning and purpose of the law which regulates them.
This must be the case for all one's transactions, including the bona fides ones. Therefore, I consider the subjective criterion of abuse of law to be redundant.
The use of the subjective criterion by the authorities may be especially harmful in situations where it is the only used criterion. The denial of a tax advantage based purely on the 'smell test' by the tax authority or by a judge, without simultaneously taking into consideration the meaning and purpose of the law, is in violation of the constitutional requirement that no tax shall be levied without it being prescribed by the law.
In my opinion, the abuse of law principle is not helping in determining which forms of tax planning are lawful, and which are breaching the law. In tax law, this principle should be avoided.
It seems more useful to utilize broader teleological interpretation methods. In that case, abuse of law could be of use as an interpretational crutch within teleological interpretation, but not a standalone and decisive criterion of the legality of one's actions.