Legal Transplants, Tax Law Systems and the EU Standard of Tax Good Governance

Question 1

4 reasons to study comparative tax law - from 4 different perspectives

Answer 1

1. Practitioner awareness: what type of solutions are out there?
2. Policy knowledge: what type of solutions exist for specific problems? What ideas can be borrowed?
3. Comparative legal experts: in which cases did countries start with the same system but ended up differently? Or vice versa?
4. Convergence: what solutions seem to work? Can they be adopted by other countries?

Question 2

What do we study when studying comparative tax law? 4 points

Answer 2

Basic structures

Country differences

Influence on each other

How different rules function in different countries to resolve similar problems

Question 3

What is a legal transplant?

Answer 3

Moving of a rule or system of law from one country to another

Question 4

Name 2 examples of when legal transplants happened

Answer 4

1. Eastern Europe adopting Dutch Civil Code because they wanted a code that wasn’t German or Russian
2. Latin America adopted French Civil Code because of Napoleon

Question 5

What can be transplanted?

Answer 5

Specific rules, institutions, conceps or whole legal systems, codes, or branches of law

Question 6

Do the legal transplants change when adopted to another country?

Answer 6

Yes, is influenced by the already existing differences in legal system, tax system, and culture of recipient countries

Question 7

5 reasons why legal transplants take place

Answer 7

1. Efficacy
2. Prestige/imposition (prestige from adopting certain laws; imposition from EU on prospective member countries)
3. Change and necessity
4. Politcal, economical, and reputational incentives
5. Authority

Question 8

Intended vs. unintended legal transplantation

Answer 8

Intended: decision by law-maker or imposed by a supranational institution (EU’s acquis communitaire) or international institution

Unintended: globalization causing cross-border transactions to take place, and legal practitioners influence the transplant of one concept into their tax system

Question 9

How does being a unitary vs. federal state affect taxation?

Answer 9

Can the federal state levy taxes?

Question 10

How does taxation being centralized vs. decentralized affect taxation?

Answer 10

Are law-making powers concentrated for the central government or decentralized by local governments?

Question 11

What is a legal system?

Answer 11

A body of tax systematically unfolding, between the parts of which there is coherence and consistency

Question 12

How does David classify legal systems?

Answer 12

Romano-Germanic (civil law)
Common law
Socialist law
Muslim/Hindu law
Jewish law
Far East law

Question 13

How does Zweigert and Kotz classify legal systems?

Answer 13

Romanistic
Germanic
Common law
Nordic legal system

Question 14

Why do we care about classifying countries into different legal systems?

Answer 14

Provides insight to the historical roots of any particular country’s system, thereby providing a better understanding of the underlying legal culture

Question 15

7 characteristics of a civil law legal system

Answer 15

1. Roman roots, later codification
2. Distinction between public law (cannot be negotiated between private citizen and state) and private law (law of obligations, contracts)
3. Vague terminology, connecting tax law to other branches of law
4. General rules given by the legislature based on principles to provide framework for the government to fill out with specific regulation
5. Principles interpreted by judiciary within limitations of separation of powers
6. Ideas of justice and morality behind the formulation of principles (role of scholars in formulation of principles)
7. Cases are not regarded as precedents and can be changed by another court

Question 16

6 characteristics of a common law system

Answer 16

1. English law + US law
2. Judge-made law on a case-by-case basis developing precedents (stare decisis doctrine)
3. Judiciary has more freedom in law-making and interpretation
4. No distinction between public and private law
5. Distinction between common law and equity (equity compensating for common law; equity more flexible and concerned with fairness and seeks to provide remedies that are fair in situations where strict application of common law rules might lead to an unjust outcome - in practice limited by procedural rules)
6. Rules of common law found in decisions of the judiciary - ratio decidenci

Question 17

4 sources of law in civil law legal systems (in order of importance)

Answer 17

1. Enacted laws or legislation
2. Jurisprudence (decided cases)
3. Custom
4. Legal writing (doctrine)

Question 18

Sources of law in common law countries (in order of importance)

Answer 18

1. Decisions of the courts (Supreme Court, lower courts)
2. Statute law (acts of parliament)
3. Custom
4. Legal writing
5. Natural justice (fundamental principles aimed at ensuring fairness and due process)

Question 19

Classifications of tax systems

Answer 19

Common law tax systems (Commonwealth, American)

Civil law (French, Latin American)

Northern European tax systems (Germany, Nordic, Baltic)

Transition and post-conflict systems (former USSR)

Southern European

Japanese/Korean

Question 20

5 characteristics of a civil law TAX system

Answer 20

1. Formal and systematic definition and categorization of taxes
2. Schedular approach to income
3. Fairly abstract concepts/principles
4. Use of private law concepts for tax law (e.g., ownership)
5. Judiciary limited in powers of interpretation - tax statutes have small room for interpretation by judiciary

Question 21

3 characteristics of a common law TAX system

Answer 21

1. Global approach to income applicable to all types of income
2. Autonomy of tax law from other branches of law
3. Detailed interpretation of the statute made by the judge - courts play important role in development of tax law, esp. in terms of deciding the intention of the law

Question 22

Definition of taxes in civil law

Answer 22

Taxes are a subset of a more general category of compulsory contributions (monetary contribution paid to public authority that helps raise revenue)

Question 23

Definition of taxes in common law

Answer 23

No definition on what a tax is; more common to say taxes and fees, looking at the substance instead of formal characterization

Question 24

What is the EU standard of good governance in tax matters?

Answer 24

The introduction of a certain clause in agreements in exchange of development funds or to avoid being blacklisted for bad tax behavior; committing to transparency, exchange of information, fair tax competition, BEPS etc.

Question 25

What is the list of non-cooperative jurisdictions?

Answer 25

List of countries not cooperating with EU good governance in tax matters; highly controversial as no EU countries on the list despite meeting the requirements

Question 26

What EU standard of good governance in tax matters has been criticized as…

Answer 26

Neo-colonialism; hypocritical

Question 27

How does the EU seen their own EU standard of good governance in tax matters?

Answer 27

As a core instrument of EU external policy and will include it in all relevant future negotiations on international agreements

Question 28

Why import/export EU standards - 5 reasons

Answer 28

1. Authority
2. Prestige and imposition
3. Change and necessity
4. Efficacy
5. Political, economical, and reputational incentives

Question 29

Which parts of the EU standard of good governance in tax matters is an import of norms from other international agreements?

Answer 29

Transparency and exchange of information - developed by G20-OECD + BEPS

Question 30

Which parts of the EU standard of good governance in tax matters is an export of norms from EU to third countries?

Answer 30

Fair tax competition