Part 1 - AL-Tax

Chapter 8Member States, reflect the clear desire from (at least some) Member States toretain full control of their tax policies. The main areas of EU intervention can besummarized as follows:●●●The EU role in taxes is mainly limited to indirect taxation and tax state aid.Articles 90–93 EC deal specifically with tax provisions. However, the scopeof these articles is limited as they only allow the European Commission towork on ‘provisions for the harmonization of legislation concerning turnovertaxes, excise duties and other forms of indirect taxation to the extent that suchharmonization is necessary to ensure the establishment and the functioningof the internal market within the time-limit laid down in Article 14’. Article87 EC on State aid provides another rationale for intervening when a tax distortscompetition by favoring certain undertakings or the production of certaingoods and affects trade between Member States. Despite its strict formulation,this article has been widely used by the European Commission to removeharmful tax measures.Nondiscrimination is increasingly used as a basis for intervention. Article12 EC enshrines this principle. The use of this article to tackle differencesin taxation between residents and nonresidents is nevertheless difficult.Indeed, the principle of nondiscrimination only applies as long as the personinvoking it lies within the scope of the Treaty. A resident citizen cannotask for anything other than the application of the law of her/his own State.Therefore, a resident cannot use this article to contest the nontaxation of anonresident since the only provisions she/he can use would be the regimeapplicable to residents. However, both the ECJ and the European Commissionhave used a broad interpretation of this article to act against some tax measuresconsidered detrimental to the Single Market.Tax obstacles to the Single Market remain the first ground for interventionin direct taxation. Article 94 EC has been the principal legal basis on whichthe European Commission has acted when issuing proposals for directivesin fiscal matters. It states that ‘the Council shall, acting unanimously on aproposal from the European Commission and after consulting the EuropeanParliament and the Economic and Social Committee, issue directives forthe approximation of such laws, regulations or administrative provisions ofthe Member States as directly affect the establishment or functioning of thecommon market’. Indeed, differences of treatment in terms of accounting andfiscal rules both constitute a distortion that directly affects the functioning ofthe markets for goods and financial services and prevents full integration in177