handbook-tb

Preventing avoidance of permanent establishment statusadopting a more economic view of independence and groups of companies.In this context, GAARs should be preferred to administrativeor judicial doctrines. 122 Although this is not the place to study theadvantages and disadvantages of GAARs, which are often (somewhatunfairly) charged with creating uncertainty, it is sufficient to state thatthey have proved their effectiveness in developing countries, whichalready have experience in their application or are on their way to testingtheir usefulness. 123 Moreover, there are ways of reducing the charges ofuncertainty against GAARs by regulating an appropriate administrativeframework for their application. 124 Tax legislation, administrativeinstructions or circulars could address the main principles relating tothe correct interpretation of GAARs, and could make any necessary correctiveadjustments, at least, in the most severe cases. This strategy hasseveral advantages: (a) it provides legal certainty to foreign investors;(b) it unifies the criteria used by different tax offices in a country; (c) itmay, depending on its form, also have an important effect upon courtswhen interpreting tax treaties; and (d) subject to consultations withtreaty partners (competent authorities), it also provides certainty in theapplication of tax treaties and reduces conflicts between jurisdictions.Uncertainty regarding PEs may also be reduced by making the administrativeopinions on when there is artificial avoidance of PEs public,or, alternatively, by publicizing the decisions taken by administrativeboards in charge of deciding whether there is avoidance of domesticrules on this issue. In addition, an advance ruling procedure could beestablished to determine whether or not some structures are PEs. 125It should be recalled, however, that GAARs are there to ensurethat laws and treaties are not interpreted too literally, not to create122See J. Freedman, “Designing a General Anti-Abuse Rule: Striking aBalance,” (2014) Asia-Pacific Tax Bulletin.123See C. Silvani, “GAARs in Developing Countries,” International FiscalAssociation Research Paper (Amsterdam: International Fiscal Association,2013).124See, J. Freedman, “Designing a General Anti-Abuse Rule: Striking aBalance,” supra note 122.125This kind of advance agreement on whether there may be a PE or notis also a risk-management tool that permits countries to concentrate on taxpayersthat have not approached the tax authorities.399