European Tax Law

1. European Tax Law The sources of European Taxation Law Academic Year 2018-2019 Prof. Pietro Boria

2. The System of the European Sources of Law and the Treaties of the European Union • The sources of European law can be distinguished essentially in two basic types: • the primary law established in the Treaty of the European Union; • the derivate legislation, defined in legal acts issued by the EU institutions (and thus typically in the regulations and the directives, as well as in the so-called soft law). • The Treaty on the European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU) • constitute the real “Constitutional chart” of the European Union; • establish the qualifying principles and the fundamental values of the process of integration of the Member States; • express the primary legal logic of the EU. The sources of European Taxation Law

3. The Fundamental Principles of the Taxation LawExpressed by the Treaties of the European Union The Fundamental Principles of the Taxation Law Expressed by the Treaties of the European Union are the followings: • The reduction of the customs duties and the establishment of the Customs Union • The principle of taxation non-discrimination of trade among the Member States • The discipline of the State aids • The containment of Public Monopolies • The tax harmonization • The principle of efficacy and the preservation of National Taxation Systems The sources of European Taxation Law

4. The reduction of the customs duties and the establishment of the Customs Union • Art. 3 point a) TEU establish the banning of customs duties or charges having equivalent effect on goods entering and leaving the State • General principle applicable to the taxation law • Fundamental standard: • for the establishment of a common market; • removal of customs borders; • Instrumental link with the freedom of movement of goods: • aim to allow the free movement of goods or services within the territories of the Member States • This value is then connected to the principle of the Customs Union, which provides for the establishment of a unified tariff of customs to be applied to all goods coming from outside countries The sources of European Taxation Law

5. The Principle of Taxation Non-Discrimination • art. 110 TFEU prohibits Member States: • from applying domestic taxation to the products of other Member States in excess of the charges applied to similar domestic products; • to have recourse to an internal tax designed to protect domestic goods over foreign products. • art. 111 TFEU precludes the use of internal tax rebates in excess of the taxes actually levied for the goods exported to the EU countries • art. 112 TFEU states that for the taxes different from indirect taxes it can be applied remission and repayment to the exports and introduced compensation fees, provided that: • it is expressly formulated the approval of the EU bodies; • these internal provisions cover a limited period of time. • These provisions of the Treaty: • express the need to ensure a neutral treatment to the commercial transactions carried out within the common market; • exclude that the Member States may take protectionist or interventionist positions. The sources of European Taxation Law

6. The Discipline of the State Aids • Art 107 TFEUprohibits the granting of State aids, which: • favour certain enterprises or certain products; • may affect trade so as to distort or threaten to distort the system of free competition; • The benefit must necessarily be selective, revealing that is suitable to benefit specific and limited enterprises or market sectors. • It is envisaged a complex procedure that involve the Commission: • “formal investigation” about the compatibility with the EU law of the internal measures oriented to give a support to domestic enterprises in order to issue the relevant authorization; • basically with a preventive nature; • by assessment of compatibility of more favourable national rules to the principles and rules of EU law. The sources of European Taxation Law

7. The Containment of Public Monopolies • The art. 37 TFEU introduces a number of limitations with regard to the fiscal monopolies. • This norm requires: • to initiate a gradual reduction of the existing monopolies, • to refrain from establishing new monopolies compared to the existing ones (so-called standstill clause). • fiscal monopolies are an unnatural restriction of the competitive order due to an undue presence of the government (or the State authorities) in the market, capable • of distorting the normal dialectic of the competition regime; • to alter the framework of the fundamental freedoms recognized by the EU law. The sources of European Taxation Law

8. The Tax Harmonization (I) • The art. 115 TFEU defines the target of the harmonization of the laws of the Member States : • with regard to the turnover tax, consumption tax and other indirect taxes; • to the extent that harmonization is necessary to ensure the establishment and functioning of the common market. • This rule is intended to achieve a regulatory framework which tends to a homogeneous architecture of the tax systems of the various Member States • It is a general principle with a “positive” content, namely intended to establish a rule of gradual integration of national taxation systems and not a mere delimitation and foreclosure. • Rulemaking procedure: • prior consultation of the Parliament, which is mandatory but not binding on the Council; • is not included the adoption of the principle of qualified majority being on the contrary required the unanimity in the decision of the Council; The sources of European Taxation Law

9. The Tax Harmonization (II) • The art. 113 TFEU provides for the general rule of harmonization of direct taxes approximate the national legislation. • This rule has been interpreted as the axiological foundation of the use of recommendations and other forms of soft law addressed to Member States concerning the progressive approach of the provisions relating to the taxation of income. The sources of European Taxation Law

10. The Principle of Effectiveness and the Preservation of National Taxation Systems • The art. 119 par. 3 TFEU provides the aims of economic policy of the European Union that require “healthy public finances”. • The art. 121 TFEU where it is declared that the Member States should regard their economic policies as a “matter of common interest”. • The art. 126 TFEU where it is expected that the States must avoid excessive public deficit based on predetermined parameters (and in particular in relation to the ratio of public debt compared to the GDP, gross domestic product). • The European Union must ensure the establishment of appropriate regulatory mechanisms to allow the individual Member States the research for the target of efficient public finances in terms of the proper functioning of the tax system; • The principle of effectiveness of national public finance plays a dialectical role, as compared to other values of European inspiration, correlated with economic freedoms; • Underlying logic: the protection of national public finances must be intended as the necessary protection of the fundamental mechanisms of the common market. The sources of European Taxation Law

11. The Principle of Effectiveness and the Preservation of National Taxation Systems • Prevent the “fiscal crisis” of the nation-State it seems necessary to increase the degree of efficiency and soundness of the common market; • Two different lines of regulatory intervention related to the principle of efficiency and preservation of national taxation systems: • the European Union must ensure the concrete pursuit of the general interest to taxation of the national State: • recognition of the legitimacy of national standards established to cover the tax obligation • through the limitation of the phenomena of tax evasion and avoidance • the European Union must ensure full assistance to the tax administrations of the Member States: • through information exchange and cooperative mechanisms; • in order to ensure constant monitoring and a greater degree of efficiency in the supervision and control of the conduct of taxpayers. The sources of European Taxation Law

12. The Legislation of European Union • The tax matters are also regulated by the rules set out in the regulatory measures adopted by the EU institutions such asderivate taxation law • to indicate precisely the nature of rules which do not originate with respect to the establishment of the European community in the Treaties, but “derived” from the choices made by the EU bodies • The Regulations • The EU Directives • The Multi-Lateral Agreement • The Soft Law Instruments The sources of European Taxation Law

13. The Regulations Relating to the Taxation Matters • The main characteristics are represented by: • the general and abstract regulatory effect • the direct applicability of the rule (self-executing act) • For the purposes of tax matters the Regulations have been used sporadically. • Two blocks of provisions are in fact to be distinguished: • provisions concerning the customs rules; • provisions concerning others sectors of the tax law (mainly the discipline of procedural prophiles of the harmonized taxes); The sources of European Taxation Law

14. The EU Directives on Taxation (I) • The main legislative instrument adopted in the tax matter is the Directives issued by the Council; • acts which produce a binding effect for the Member States; • relating to the setting of the aims, general or detailed; • to be achieved in a certain period of time • compared to which the States are free to choose the most appropriate forms and methods for the practical implementation into the national legislation. • The effectiveness of the Directive is mediated through the legislative measures taken by the national transposition; • However the Directives containing detailed and unconditional rules, when it is over the deadline for their implementation by the national transposition, produce direct, immediate and mandatory legal effects (so-called self-executing Directives). The sources of European Taxation Law

15. The EU Directives on Taxation (II) • With regard to the tax regulation it can be identified numerous Directives concerning various areas of taxation: • the discipline of the value-added tax (VAT); • the field of excise duties; • the taxation of capital raising. • The use of Directives in direct taxation takes on a completely marginal role, being confined to a sectorial and rather limited framework, with no significant influence on the structural aspects of the tax system background. The sources of European Taxation Law

16. The Adoption of the Soft Law Instruments to Regulate the Taxation Matters (I) • The Soft Law Instruments are: • of a “light” nature; • essentially programmatic; • non-binding capacity. • Acts that play a supervisory role, stimulating and address policy legislation. • Recommendations, Resolutions, Interpretative Notes, Communications, Guide Lines, Invitations and Suggestions to the legislative bodies of the individual Member States in order to agree to a common position regarding the regulation of the law. • The soft law is an appropriate instrument to achieve at a gradual process of coordination and harmonization of national tax systems to the taxation models developed at European level. • With regard to the direct taxation it can be recorded the existence of a large number of acts with programmatic content, typical expression of the EU soft law. The sources of European Taxation Law

17. The Adoption of the Soft Law Instruments to Regulate the Taxation Matters (II) • In the ambit of the Soft Law, a great relevance has, for instance, the package “Monti” in the matter of harmful tax competition between States, that giver rise to the adoption of the “code of conduct”. • The “code of conduct” is intended to provide general guidelines for a coordinated action at EU level in order to reduce the distortions arising from the national tax laws. The sources of European Taxation Law