During its EU Presidency (July – Dec 2005), the UK will campaign for a reduction in the powers of the European Court of Justice (ECJ) in tax matters.
The move, announced by UK officials on 20 June 2005, comes as a reaction to a recent series of cases in which the ECJ has acted to increase the circumstances in which companies may claim tax rebates. The cases have led to fears of a flood of rebate claims from big corporations which could amount to huge losses in revenue for governments across the EU.
In April, in the Marks & Spencer case, the court’s advocate-general gave a preliminary view that refunds could be claimed in relation to offshore subsidiaries (see EURACTIV 7 April 2005). In May 2005, in an Austrian case, Kretztechnik, the court ruled that companies could recover VAT on fees charged by advisors on share issues.
Direct taxation is not dealt with in the EU Treaty and therefore remains solely in member state jurisdiction, but the companies involved in the ECJ cases have argued for rebates on the basis of the Treaty’s fundamental concepts of free movement of capital and freedom of establishment.
At the June 2005 EcoFin Council, a proposal was made by the German finance minister Hans Eichel that a special committee be set up to look into the issue.