The European Commission and EU tax litigation

1. The European Commission and EU tax litigation Dr Adam Zalasiński

2. Disclaimer The views are personal to the author and do not purport to represent the views of the European Commission. IFA UK

3. Structure • The Commission and infringements procedure • The Commission and preliminary rulings • The effects of EU tax litigation on the law making process in the Member States IFA UK

4. Types of proceedings in which the Commission is involved • Contentious procedure • Infringements actions under Art. 258 TFEU • As the applicant – it brings MSs to the Court • Non-contentious procedure • Preliminary rulings under Art. 267 TFEU • As ‘amicus curiae’ – it submits written observations and appears in hearings IFA UK

5. Infringements procedure – an outline • Stages • Informal stage (pre-258 letter or EU-Pilot inquiry) • Administrative stage • Letter of formal notice • Reasoned opinion • Judicial stage - referral to the ECJ IFA UK

6. Infringements procedure – legal nature • Objective nature of the infringement procedure: • It concerns ‘an objective finding of a failure to fulfil obligations and not on a proof of any criteria or opposition on the part of the Member States concerned’ (Case 301/81, Com v. Belgium) • It makes an objective assessment of the legality of the MS’s behaviour (no guilt/intention issue) IFA UK

7. Infringements procedure from a technical point of view • It concerns: • Comparison of the MS’s legislation and its application, with EU requirements • Discussion of the outcome of such a test with the MS concerned (administrative stage) • Referral to the ECJ in case of divergent views and lack of consensus between the MS and the Commission IFA UK

8. Preliminary ruling – an outline • Interpretation of EU law • Primary and secondary • Courts of last instance – obliged to refer a question • Courts of lower instances – entitled to refer a question • Validity of Community acts • Secondary law and decisions in individual cases (all domestic courts obliged to refer a question if they have doubts as to validity) IFA UK

9. European Commission in preliminary rulings • The European Commission • As ‘amicus curiae’, sends written observations and provides the ECJ with ‘authoritative’ opinion on the matter referred by a domestic court, • Appears in the hearings and responds to written observations of other participants. IFA UK

10. How does the Commission identify EU requirements? (1/3) • Sources of information allowing the Commission to determine EU requirements: • In case implementation of directives (so-called positive integration): • Pre-adoption discussions with MS (WP IV, Fiscal Questions Group in the Council) and Commission’s own analysis • In cases of infringements/interpretation of the TFEU (so-called negative integration) • Commission’s own analysis and earlier case-law of the ECJ IFA UK

11. How does the Commission identify EU requirements?(2/3) • ECJ’s decisions are interpreted as establishing precedents despite • The lack of stare decisis principle – no obligation for the Court to follow its earlier decisions, BUT: • General principle of equality • Doctrine of Acte éclairé • The Commission looks for general norms stemming from the judgments, • The Commission applies them to other cases unless there are circumstances which allow it to distinguish the cases IFA UK

12. How does the Commission identify EU requirements?(3/3) • Problem of lack of clarity or insufficient clarity in ECJ’s case law: • Dividends (C-513/04, Kerckhaert-Morres), • Withholding taxes (C-282/07,Truck Center), • A-A measures (possible degrees of ‘artificiality’), • Cross-border losses (M&S, Lidl Belgium), • Are DTCs excluded from EU scrutiny (C-376/03, ‘D’)? IFA UK

13. The effects of infringements on the law making process in the Member States • General rule: • The effects resemble the rule infringed • In cases of ‘positive integration’ we achieve common standards agreed in the Council • In cases of ‘negative integration’ we achieve elimination of discrimination/restriction on free movement IFA UK

14. The effects of preliminary rulings on domestic tax law • Direct consequence: • Taxpayers’ rights are ensured within judicial control of tax administration’s decisions, • Indirect consequence: • National law maker should respond to the ECJ’s ruling if domestic law does not conform with the interpretation of EU law by the ECJ • If not – an infringement proceeding may be opened. IFA UK

15. The effects of EU litigation on the law making process in the Member States • Empirical study (General Report for 2006 FIDE Congress) • MS frequently abolish more preferential domestic regimes instead of extending them to cross-border situations, or • Extend application of norms limiting taxpayers’ rights in cross-border situations to domestic cases IFA UK

16. Conclusion • The Commission investigates the general rules stemming from the ECJ’s decisions • It promotes more universal application of these general rules in all MS (in infringements actions and preliminary rulings) • It seeks to secure their enforcement despite the lack of formal stare decisis obligation for the ECJ • The effects of litigation resemble the ratio legis of the rule infringed/interpreted – of limited use for developing new positive standards IFA UK

17. Thank you for your attention. adam.zalasinski@ec.europa.eu IFA UK