The Clash Between European Freedoms and National Direct Tax Law: Public Interest Defences Available to the Member States

Abstract

In the early days of Community law the ECJ, still sheltered from political constraints, was able to develop its jurisprudence on the EC fundamental freedoms with a view to enhancing the development of Community law and to advancing the Internal Market. More recently, however, the case law in the field of direct taxation has more and more come into the political limelight as fundamental tax policy questions and billions of tax revenue are at stake. As the Court’s decisions also take account of the dynamic evolution of the Community’s legal system and are much influenced by considerations of policy and economics, recent case law seems to put more emphasis on a cautious re-balancing of taxpayer rights under the fundamental freedoms and possibilities for Member States to justify restrictive tax measures on the basis of overriding public interest reasons. However, the Court’s recent attempts have also warranted criticism from the perspective of legal certainty, due to the potential disregard of legal precedent and the concern that the Court might deviate from general Internal Market principles in this particular area. Against this background, the present contribution aims at systematizing the recent developments and dogmatic approaches underlying the body of case law in the field of direct taxation with respect to (acceptable and unacceptable) justifications of infringements on taxpayer rights to free movement and non discrimination.