Saturday, April 28, 2007

Trans-Atlantic European Tax Law

Two interesting papers and a book recently published demonstrate a surge of interest across the Atlantic on the topic of European Tax Law.

EC Tax law is receiving increasing attention from the academia in the past years. The tax impact of the European Court of Justice (ECJ) judgments specially when dealing with the application of the fundamental freedoms have lead to numerous discussions, articles and books in the past years. One recent trend has been that the discussion forum has expanded geographically. A good example last year was that U.S. Law professors wrote one of the best papers on EC Tax Law (see Michael J Graetz and Warren, Alvin C "Income Tax Discrimination and the Political and Economic Integration of Europe" Yale Law Journal, Vol. 115, pp. 1186-1255, April 2006). In recent weeks I came across further contributions from the other side of the Atlantic which I must leave as suggestions.

In October 2005, a group of EU and US tax experts gathered at the University of Michigan Law School to discuss the different approaches taken by the ECJ and the U.S. Supreme Court to the question of fiscal federalism. The recent book Comparative Fiscal Federalism, Comparing the European Court of Justice and the US Supreme Court’s Tax Jurisprudence which is edited by Reuven S.Avi-Yonah, James Hines & Michael Lang will definitely further contribute to understand how those two systems or building blocs deal with different policy aspects.

In my last visit to Brazil, I came across authors interested in the tax sphere of the European economic integration, namely due to the development of the Mercosul. It is also not suprising that valuable contributions on the European topic come also from Brazil (e.g. Profs. Luís Eduardo Schoueri and Heleno Torres) and other South American countries.

Two papers provide further analysis to two sub-topics that are high in the agenda of European Tax Law. The first is the necessity and inherent difficulty to find a consistent line of the jurisprudence of the ECJ concerning the tax discrimination field. Te second paper addresses the hot topic of whether the fundamental freedoms of the EC Treaty encompass an absolute requirement on the Member States to mitigate double taxation, especially in view of the recent Kerckhaert & Morres case .

In first place Ruth Mason (University of Connecticut School of Law) has recently posted "IIn Search of Internal Consistency: Tax Discrimination in the EU“. Columbia Journal of Transnational Law, Vol. 46, 2007.

Here is the abstract:
The European Union was created to bind the countries of Europe together economically to prevent future wars. Rigorous enforcement of EU nationals' fundamental economic freedoms before the European Court of Justice (ECJ) has furthered economic integration. The fundamental freedoms prohibit tax discrimination—harsher tax treatment of cross-border economic activities than purely internal activities. Critics of the ECJ argue that the Court's broad interpretation of the EC freedoms causes it to find tax discrimination where there is none. This tendency encroaches upon the sovereignty of EU member states and hampers their ability to pursue economic policy goals. In contrast, based upon a survey of all the ECJ's tax discrimination decisions, this Article offers a more nuanced critique that shows the ECJ's errors in tax discrimination cases go in both directions. In addition to finding discrimination where there is none, the Court also sometimes fails to recognize discrimination. The Court's failure to recognize tax discrimination undermines the economic integration of Europe and abridges EU nationals' personal rights. This Article is the first to identify the Court's method of review in tax discrimination cases, the comparable internal situation test (CIST), as a principal contributor to the Court's difficulty in tax cases. Instead of CIST, the Article proposes that the ECJ borrow a method developed by the U.S. Supreme Court for tax cases arising under the Commerce Clause: the internal consistency test (ICT). Adoption of this simpler method should enable the ECJ to make more coherent tax decisions, which will promote economic efficiency and integration of the European common market.

Secondly, Georg Kofler (NYU) and Ruth Mason have jointly posted, "Double Taxation: A European 'Switch in Time'?“. Columbia Journal of European Law, Vol. 14, No. 1, 2008.

Here is the abstract:
This article considers whether the fundamental freedoms of the EC Treaty encompass an absolute requirement on the Member States to mitigate double taxation, and it concludes that such a requirement could reasonably be inferred from the goals of the fundamental freedoms and the European Court of Justice's double burden jurisprudence. Notwithstanding the reasonableness of that interpretation, in the recent Kerckhaert & Morres case, the Court of Justice found that the EC Treaty permits double juridical taxation, even though double taxation distorts the Internal Market. We review the history of the Court's relevant jurisprudence, consider alternative theories under which the Court could rule that double juridical taxation violates the EC Treaty, and compare the treatment of double state taxation in the United States by the Supreme Court under the dormant Commerce Clause.

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