Balanced Allocation and Coherence: Some Thoughts in Light of Argenta and K

Abstract:

The Court of Justice of the European Union (hereinafter the 'Court') generally refuses justifications put forward by the Member States for restrictions of the four freedoms which are based on the need to prevent the loss of tax revenue. In its case law, the Court made limited exceptions to this general principle by allowing Member States to safeguard the coherence of its tax system and to preserve the balanced allocation between the Member States of the power to tax. The scope of the coherence argument is limited by the (traditionally) strictly interpreted requirement to have a 'direct link' between a tax advantage and a subsequent tax levy. The justification ground balanced allocation is generally only accepted if the restriction is a necessary measure taken by the Member State to avoid the (risk of) shifting of profit or losses by taxpayers.

In its recent judgments in the cases Argenta (C-350/11, rendered on 4 July 2013), and K (C- 322/11, rendered on 7 November 2013), the Court applied both justifications grounds. Although the facts of both seem (at first sight) to be similar, the Court reached a completely different outcome. The article critically discusses and compares both recent cases in light of the Court's previous case law.