‘Ability to Pay in European Community Law

Abstract:

After the financial and economic crisis the principle of the ability to pay has regained importance as a principle shaping the structure of income tax. This article deals with the question whether that principle has any role to play in the application of EU tax rules. It analyses whether there is a legal basis to apply this principle in EU law and the way in which this principle is applied in cross-border situations. The conclusion is that although ability to pay is part of the general principles of EU law, there is no clear legal basis in the treaties for the principle to be applied. The absence of this legal basis combined with the one country approach of the ECJ in discrimination cases results in an occasional and inconsistent application of the ability to pay principle.