The 'Labyrinth of Impossibility' in the Tax Cases of the European Court of Justice: Is the Comparability Analysis a Way Out?
Bocconi University - Department of Law
July 23, 2013
Bocconi Legal Studies Research Paper No. 2297470
The first six sections of the paper explore the criteria used by the ECJ in different cross-border activities and transactions to determine whether two situations are comparable either from the perspective of the destination/host country (inbound comparables) or from the perspective of the origin/home country (outbound comparables). Inbound comparables can be said to be loosely based on a “capital import neutrality” (CIN) concept, while outbound comparables can be said to be loosely based on a “capital export neutrality” (CEN) concept, but in both cases there is no evidence the Court is explicitly using those economic standards to adjudicate tax cases, what the Court does is to develop an equal protection standard infused with efficiency considerations in so far as restrictions affect the proper functioning of the EU market. The final part of the paper (sections 7 through 11) relies on the empirical descriptive work developed in the previous sections and addresses the criticisms that have recently surfaced in the current U.S. legal discourse on the tax cases of the ECJ. The final section of the article shows that, with some exceptions, the Court has developed a remarkable set of criteria of comparability inspired by the idea of market efficiency. A claim is made that the Court’s methodology provides a partial escape from of the “labyrinth of impossibility” imposed by the lack of harmonization of standards of comparability (origin vs destination standard) and of tax rates, and a two-step approach is proposed that at the same time describes what the Court is already doing and recommends what the Court should do to add transparency to its approach.
Number of Pages in PDF File: 52
Keywords: international taxation, comparative taxation, european court of justice, tax case law, comparability analysis, capital import neutrality, capital export neutrlity, corporate tax, multinationals, US taxation
Date posted: July 24, 2013