The Contemporary Meaning of ‘Sovereignty’ in the Supranational Context of the EC as Applied to the Income Tax Case Law of the ECJ

Abstract

In the more than twenty years that the European Court of Justice (ECJ) has been deciding income tax cases, it has become clear that Community law has had a progressively increasing impact on the direct tax systems of the Member States. On the occasion of several seminal judgments, many legal scholars have raised concerns whether the ECJ was heeding a sufficient amount of respect for the ‘income tax sovereignty’ of the Member States. Especially on the occasion of the Bosal decision of 2003, many tax scholars thought and wrote that the ECJ had started interpreting the internal market freedoms too broadly and that the Court did not give sufficient consideration to the particularities of direct taxation. In light thereof, the present article will address the following three questions: (1) What significance, if any, does the concept of ‘sovereignty’ have in the contemporary supranational environment of the European Union/European Community? (2) Within such contemporary meaning, can the quality of ‘sovereignty’ with regard to direct taxation be considered to have remained with the Member States, has it been acquired by the European Union/European Community or has it been shared by the Member States and the Union/Community level? (3) What are the normative implications of the answer to the previous question and have these normative implications been respected by the states and supra-state actors? All too often, tax scholars equate ‘sovereignty’ with the concepts of ‘competence’ or of ‘jurisdiction’. With regard to acquiring a thorough understanding of the ‘sovereignty’ concept, however, it is necessary to abolish a tax legal perspective altogether and venture into the field of political sciences. An analysis of the non-legal background of the concept ‘sovereignty’ will show that it is defendable to confer an epistemic and normative significance to the ‘sovereignty’ concept that goes beyond the strictly legal concepts of ‘competence’ or ‘jurisdiction’.