In this chapter, Frans Vanistendael assesses the principles of freedom of movement and neutrality applied to taxation in light of the main objectives of the European Union as formulated in the TEU and TFEU, that is, the establishment of the internal market. First, the chapter provides for an illustration of the causes of the present inconsistencies in tax policy deriving from the current constitutional framework and allocation of powers between the EU and the Member States. Second, the chapter proposes a possible resolution of these inconsistencies in order to solve cases of discrimination and double economic and juridical taxation arising from the cumulative application of national tax regimes, based on the objectives of competitive export tax neutrality and competitive import neutrality. Finally, a link is made between the achievement of these goals and the need to reform the EU framework as regards harmonization of corporate taxation and financing of the common EU budget.
Anti-tax avoidance has a long history in the European Union. It begins with the concept of ‘abus de droit’ as developed in French case law under the Civil Code of 1804. From its application in different areas of civil law, that concept also found its way into EU law through the CJEU’s jurisprudence. Abuse of law thus developed into a pillar of EU law, spreading through the law of customs duties, VAT and income taxation as a principle restricting the unlimited exercise of the EU fundamental freedoms. Recent legislative developments at the international and the EU level may be upending the balance found in previous case law. It is not clear how the CJEU will react to the shift from an analysis of all facts and circumstances of each individual case of tax avoidance to a more general approach of characterising a category of arrangements as ‘base erosion’ on the base of certain indications or hallmarks. The purpose of this chapter is to shed light on the difference between ‘abuse’ and ‘base erosion’ and to show how the development of the latter concept poses a formidable challenge to the exercise of the fundamental freedoms in the EU.