What Can the U.S. Supreme Court and the European Court of Justice Learn from Each Other's Tax Jurisprudence?
Reuven S. Avi-Yonah
University of Michigan Law School
December 3, 2007
Comparing the US and EU experiences shows that there is more than one way of constructing a single market without tax distortions, and that some level of distortion can be accepted. Thus, the U.S. Supreme Court can afford to be a bit harsher on state tax competition without trampling down on state sovereignty on tax matters, and the ECJ can afford to be more lenient without creating unacceptable barriers to trade and investment within the EU. As long as Member States continue to have different tax rates, which is a likely and in my view desirable outcome, the ECJ should allow them to protect their base by measures such as thin capitalization, prevention of loss importation, or CFC rules. While these rules may deviate from strict open market orthodoxy, I believe that the U.S. experience shows that a well functioning open market can exist despite some level of tax distortion resulting from the disparate choices of the states.
Number of Pages in PDF File: 8
Keywords: European Court of Justice, Fiscal Federalism
JEL Classification: H25working papers series
Date posted: December 3, 2007
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