The Internal Market versus the Right of Member States to Levy Direct Tax-A Clash of Fundamental Principles

The EU treaties do not give specific powers to the Council to pass laws on direct tax. Nevertheless, the Court of Justice of the European Union (the CJEU formerly ECJ) has been carrying out the negative integration of tax laws. On preliminary reference applications, the court has interpreted the treaty articles about the Internal Market in such a way as to adversely affect national tax laws. A Member State which does not amend or repeal a national tax provision which breaches an Internal Market article is in breach of an EU treaty obligation and can be brought before the CJEU by the Commission. This article shows how individual taxpayers have avoided paying tax by pleading before a national court that the law under which they are being taxed conflicts with EU law. The author argues that the present situation is unsatisfactory, and recommends changes that could be made to the Treaties to regularize the situation.