Principles of Law

Principles of Law: Function, Status and

Impact in EU Tax Law

Editor:

Cécile Brokelind

IBFD

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Foreword

My motto for this year’s GREIT conference was “open the legal tools box”, and

find a way to satisfy my curiosity as well as to reward my efforts in “looking

around” for those who would be interested in broadening their minds through an

enriching cross-disciplinarily exercise. Happily, I have been able to find on my

way lots of friends and colleagues who have accompanied and supported me in

my quest. This book is the result of our collective journey.

Moreover, the theme chosen for this conference, The Status, Function and

Impact of Principles of Law in EU Tax Law, has provided me with an

opportunity to pay tribute to Ronald Dworkin, who sadly passed away on 14

February 2013. Indeed, in my search for the right method to approach the

research theme, I found Dworkin’s approach to the principles of law appealing,

showing that in the legal tool box, both the legal theory (philosophie du droit)

and the theory of law (théorie du droit) can be of help in carrying out the

research task at hand. Legal theory not only tries to analyse the fundaments of

the law, it also tends to find the normative value of the rule and assesses its

coercive force. By contrast, the theorists of law try to adopt an interdisciplinary

approach to study the effective practices of legal actors. At the crossroads of

these disciplines, Dworkin investigated what the aim of the law is and what its

foundations are, in order to explain whether and if so how, a specific rule is

coercive or not. He found judicial decision-making should be supported with

argumentation based on principles not policies, only the former being coercive

as granting rights to individuals. Fundamental rights, procedural principles and

administrative principles fall into this category. As explained in the coming

chapters of this book, EU tax law is built upon these principles, which today,

form the bones of our discipline. We are all concerned with the theories of

adjudication and how far judges may go in the field of tax law. This book

reflects our interrogations on some selected principles and tries to keep

Dworkin’s words alive, discussing the role of the courts in the shaping of EU tax

law. Most of us tend to agree that the European Court of Justice (ECJ) does not

create the law when applying arguments of principle in hard cases, as Dworkin

would have suggested. The extent to which political arguments interfere in this

law-making is, however, controversial and merits some more space in academic

literature.

After 7 years of continuous inquiry, conferences in universities throughout

Europe and the production of seven books, the GREIT network, founded in 2006

in Lund, returned to its country of birth in 2013, for the 8th GREIT conference

(19 and 20 June 2013). This book is a follow-up of the previous year’s

production and takes up the issues raised but unanswered during the meeting in

Madrid (2012), Litigating EU Tax Law in International, National and Non-EU

Tax Courts, when a number of underlying similar principles and general

principles of EU law were noted to have been used by the judges to interpret the

law. The remaining question was therefore to identify which principles form the

back bone of EU tax law, and what their coercive force is, irrespective of their

origins.

I am very grateful to those of my peers who committed to help me in the

organization of this mission. Firstly, I am indebted to Pasquale Pistone, Ana

Paula Dourado and Dennis Weber for their trust and continued support with the

GREIT’s activities, and I hope our common projects will continue to flourish as

they have done so far. It’s a worthwhile adventure that each individual can add

to their own personal list of achievements.

Additionally, I am also extremely thankful to all of the talented and honourable

reporters who accepted the challenge of coming to Lund, to present their views

and to contribute to this book in answer to my questions: Ana Paula Dourado,

Joachim Englisch, Xavier Groussot, Daniel Gutmann, Marjaana Helminen,

Sigrid Hemels, Oskar Henkow, Jörgen Hettne, Georg Kofler, Richard Lyal,

Guglielmo Maisto, Marta Papis, Pasquale Pistone, Robert Påhlsson, Madeleine

Simonek, Edoardo Traversa, Takis Tridimas, Frans Vanistendael, Peter Wattel,

Dennis Weber and Adam Zalasinski; thanks to you all!!!

This project would never have been carried out without the precious financial

support of the Swedish Research Council (Vetenskapsrådet), the Nordic Tax

Research Council, IBFD and the Department of Business Law, School of

Economics and Management, Lund University.

I would also like to thank dearly Pamela Finckenberg-Broman, who carefully

and enthusiastically directed the assistance of this project and helped me with all

the practicalities that I would not have been able to carry out in connection with

the hosting of our reporters and gathering together a team of dedicated helpers,

to all of whom my gratitude is expressed. I am grateful too for Eleanor

Campbell’s precious contribution in editing our reports.

Finally, I should mention that when I was working at home on this project, I

received the cheerful assistance of my dearest ones who kept the show running at

home, without which this project would never have been carried out.

To all of you and on behalf of the GREIT, my wholehearted thanks!

Cécile Brokelind

Lund, October 2013

Table of Contents

Foreword

Chapter 1: Introduction

1.1. Why bother?

1.2. What is a principle of law?

1.3. Theories

1.4. Methods and research questions

1.5. Outline of the book

Chapter 2: European Legal Principles and National Legal

Challenges

Jörgen Hettne

2.1. Introduction

2.2. The position of general principles of law in EU law

2.3. The scope of general principles of law

2.4. Effectiveness of Union law and general principles

2.5. Consistent interpretation

2.6. Consistent interpretation and general principles of law?

2.7. Abuse of rights – Principle or right?

2.8. European legal principles and national legal challenges

Chapter 3: The Role of (Legal) Principles in EU Tax Law

Frans Vanistendael

3.1. Introduction

3.2. The role of principles in tax law

3.2.1. The role of principles in tax law in general

3.2.2. The role of principles in EU tax law

3.3. Different types of legal principles

3.3.1. Difference between principles and rules

3.3.2. General principles

3.3.3. General principles in constitutional form

3.3.4. Constitutional principles of taxation

3.3.5. Constitutional principles of state organization

3.3.6. Principles in the EU legal order

3.3.7. Tax technical principles

3.3.8. Preliminary conclusion

3.4. Different forms of EU tax law

3.4.1. Different roles for principles

3.4.2. Common customs regime

3.4.3. Unharmonized indirect taxation

3.4.4. VAT

3.4.5. Direct tax directives and exchange of information and

assistance directives

3.4.6. The treaty freedoms

3.5. The functional hierarchical order of principles

3.5.1. Which hierarchy?

3.5.2. Principles as political guidance

3.5.3. Mandatory principles of EU law for the legislator and

the ECJ

3.5.4. Mandatory principles of EU law for the ECJ not for the

legislator

3.5.5. Discretionary principles of interpretation

3.5.6. Tax technical principles

3.6. Conclusions

Chapter 4: Clarifying or Diluting the Application of the EU

Charter of Fundamental Rights? – The Judgments

in Åkerberg Fransson and Melloni from 26

February 2013

Xavier Groussot and Ingrid Olsson

4.1. Introduction

4.2. Article 51 of the Charter – The most important

provision

4.2.1. Background to article 51 of the Charter

4.2.2. Comments in light of Åkerberg Fransson and Melloni

4.3. Article 52 of the Charter – The most complex

provision

4.3.1. Background of article 52

4.3.2. Comments in light of Åkerberg Fransson and Melloni

4.4. Article 53 of the Charter – The most underestimated

provision

4.4.1. Background of article 53 of the Charter

4.4.2. Comments in light of Åkerberg Fransson and Melloni

4.5. Conclusion

Chapter 5: The EU Law Dimension of Human Rights in Tax

Matters

Pasquale Pistone

5.1. Introduction

5.2. On the nature of the EU Charter of Fundamental Rights

and its implications in tax matters

5.3. The EU Charter and the search for a global

supranational dimension of fundamental rights in tax

matters

5.4. The meaning of the “implementation” of EU law in the

EU Charter

5.5. An overview of human rights in the EU Charter and

their key implications in the field of taxation

5.5.1. The right to privacy as a human right and its

implications in tax matters

5.5.2. Substantive human rights in tax matters

5.5.3. Human rights in judicial and administrative tax

procedures, as well as in respect of tax penalties

5.6. Provisions applicable to the sole EU institutions

5.6.1. Article 41 of the EU Charter

5.6.2. Article 42 of the EU Charter

5.6.3. Article 43 – Ombudsman

5.7. Conclusions

Chapter 6: Tax Sovereignty and Territoriality under Siege:

How Far Should the EU Freedoms of Movement

Impact on the Territorial Allocation of Taxing

Powers between Member States?

Edoardo Traversa and Alice Pirlot

6.1. Introduction

6.2. Exploring the meaning of the principle of tax

sovereignty in EU law

6.3. Discussing the nature of the EU Treaty freedoms for

direct tax purposes

6.4. Acknowledging the function of the principle of

territoriality in the allocation of taxing powers within

the internal market

6.5. Conclusion

Chapter 7: Equality in Taxation: Reflections on the Social

Construction of Comparability in Tax Law

Robert Påhlsson

7.1. Introduction

7.2. Equal treatment as a legal principle

7.3. Equal treatment as constitutional statutory law

7.3.1. Equality in tax law

7.3.2. Equality in the European Convention on Human Rights

7.3.3. Equality in the Swedish Constitution

7.4. The ECJ’s construction of comparability

7.4.1. The significance of the residence criterion

7.4.2. Justification of the residence criterion

7.4.3. Neutralization of the residence criterion

7.5. Conclusion

Chapter 8: The Principle of Effectiveness

Guglielmo Maisto

8.1. Introduction

8.2. Principle of effectiveness and res judicata

8.3. Principle of effectiveness and rules of national

procedures

8.3.1. Re-opening of the statute of limitations

8.3.2. Refund of taxes unduly levied and rules on evidence

8.4. Interest on taxes unduly paid

Chapter 9: Access to Effective Legal Remedy

Peter J. Wattel

9.1. The (genesis of the) right to effective judicial

protection as (a general principle of) EU law

9.2. Reach and content of the right to effective judicial

protection

9.2.1. Not just civil rights/obligations and criminal charges

9.2.2. Preliminary questions indirectly on the meaning of

ECHR rights

9.2.3. Content of the right to effective judicial protection

9.2.4. A negative and a positive obligation for national courts

9.2.5. Reasonable time limits allowed

9.2.6. Summary of minimum access to court requirements set

by EU law

9.2.7. Reverse discrimination

9.3. Access to court in respect of individual administrative

decisions and in respect of legislative acts

9.3.1. Kühne & Heitz and Byankov: Administrative decisions

that have become final

9.3.2. Sopropé: The rights of the defence in respect of

individual administrative decisions

9.3.3. Unibet: Access to court in respect of legislative acts

considered contrary to EU law

9.4. The principle of effectiveness of EU law and the right

to effective judicial protection

9.5. Interaction between the ECHR and EU law as regards

effective judicial protection

9.5.1. The EU side: Supporting ECHR law; concordance rule

(article 52(3) of the EU Charter)

9.5.2. The ECHR side: Supporting (access to) EU law

9.6. Concluding observations

Chapter 10: No Taxation without Representation in the

European Union: Democracy, Patriotism and Taxes

Ana Paula Dourado

10.1. Introduction

10.2. Legitimacy and validity of parliaments and delegated

legislation

10.3. Tax state, tax sovereignty, tax patriotism and tax exile

in the European Union

10.4. Vagueness in law and legal determinacy

10.5. Hard cases in tax law: The example of a common

GAAR in the EU Member States

10.6. Legal gaps and GAARs

10.7. The rule of law and validity in the European Union

10.8. Harmonization and separation of powers

10.9. How detailed should tax directives be: National

parliaments as executive powers when transposing a

directive

10.10. The rule of law in the European Union and a tax union:

Concluding remarks

Chapter 11: Legal Certainty, Legitimate Expectations,

Legislative Drafting, Harmonization and Legal

Enforcement in EU Tax Law

Dennis Weber and Thidaporn Sirithaporn

11.1. Constitutional recognition of legal certainty and

legitimate expectations

11.1.1. Introduction

11.1.2. The principle of legal certainty in the (tax) case law of

the ECJ

11.1.2.1. Knowledge of legal rules and foreseeability of legal

situations

11.1.2.2. Different applications of the principle of legal certainty

11.1.3. Principle of the protection of legitimate expectations

11.1.3.1. Introduction

11.1.3.1.1. General

11.1.3.1.2. Only “a prudent and circumspect trader” may invoke

the principle of the protection of legitimate

expectations

11.1.3.2. Community and national legislation with retroactive

effect

11.1.3.2.1. Substantive rules with retroactive effect

11.1.3.2.2. Procedural rules with retroactive effect

11.1.3.2.3. Community case law concerning national legislation

with retroactive effect

11.1.3.3. Immediate entering into effect of legislation;

transitional provisions on the basis of the principle of

the protection of legitimate expectations

11.2. Legal certainty, legislative drafting and tax law

application

11.2.1. General

11.2.2. Improved lawmaking: Pre-legislative consultation

process

11.2.3. Impact assessments in taxation

11.3. EU ruling system

11.4. Legal certainty, harmonization and legal enforcement

11.4.1. Harmonization and coordination of taxation in the

European Union

11.4.2. Legal enforcement: Appeals and conflict resolution

11.5. Conclusion

Chapter 12: Direct Applicability and Direct Effect

Georg Kofler

12.1. Introduction

12.2. Direct effect and direct taxation

12.2.1. Overview

12.2.2. Fundamental freedoms

12.2.3. Directives

12.2.4. International agreements

12.2.5. Recommendations

12.3. Conclusions

Chapter 13: The Principle of Proportionality and (European)

Tax Law

Adam Zalasiński

13.1. General remarks

13.2. Origins and meaning

13.3. Proportionality as a legal principle?

13.4. Fields of application