Class 3

Question 1

What is the EU legal order?

Answer 1

1. Primary law: treaties, unwritten legal principles developed by the Court of Justice on the basis of the treaties.
2. Secondary legislation: created by the European institution as organs of the supranational institution
3. Tertiary legislation: directives or regulations: implementing acts, made possible by the Lisbon treaty.

Question 2

What is positive integration and negative intergration?

Answer 2

1. Positive integration: secondary or tertiary law where the EU prepares solutions for specific problems: internal market, obstacles for the free flow of goods, services, persons and capital. Tailormade through directives, mostly through regulations.
2. Negative integration: prohibitions for MS, mostly about discrimination.

Question 3

What are methods of integrating EU law into the domestic legal order?

Answer 3

1. Soft method: prescripes the solution and interprets the domestic laws so that they are in conformity with EU law. In this way, a full clash between these legal provisions is avoided.
2. Hard method: same thing that would happen if there is a clash between the constitution and domestic rule. Solved through supremacy of EU law and direct applicability of EU law = individuals can rely on EU law before a domestic judge.

Question 4

What are the conditions of direct applicability?

Answer 4

1. Unconditional
2. Sufficiently precise

• The judge must know the legal consequence and there must not be intermediate steps to apply.
• Case Van Gend & Loos: case about customs duties but also direct applicability that applies to treaty rules and regulations.
• Direct applicability = can I derive the right to protect my position from a provision in a directive under EU law?

Question 5

Does a directive have to be correctly and on time transposed to be applied on?

Answer 5

• No, It is not a condition that a directive has been correctly and on time implemented at the domestic level.

Question 6

What is the 2 step process of a directive?

Answer 6

1. Directive starts at the EU level
2. MS implements in domestic legal order.

Question 7

Case Becker?

Answer 7

• Case Becker: VAT directive where broker loans were tax exempt and the domestic law said it’s taxable.
• Question here: Can the taxpayer rely on the provision in the directive in order to suppress the tax liability, in order to profit from the tax exemption and the conditions were that the directive must be directly effective in the sense that the rule as such must be clear; is there a tax exemption, that must be clear and the time frame for the transmission must be elapsed because it is a 2 step process.
  
  • The MS must have sufficient time to transpose the directive into domestic law: domestic machinery has to start, there must be legislative proposal, parliament must be involved, legal procedure must be gone through.
  • Once an individual can rely on a directive, treaty provision or regulation and both rules clash → non-applicability of the national law as far as it is in conflict with the EU law. Authorities and the courts have to treat this rule as if it does not exist.
• See also case Terhoeve where there is an additional element of discrimination.

Question 8

Case Humblet? Facts of the case?

Answer 8

• Issue with the Belgian law where there was a special tax levied on top of ordinary personal income tax = surtax. Progressive system for spouses where they were considered an economic unit and thus taxed together through a common tax base.
  
  • So example: both earn 50.000 → 100.000 @ 40% = 40.000. Here we have a dual effect of each spouse’s income.
• Question in this case: which effect on this tax system of a very specific provision of the EU law have and that provision is contained in a protocol on privileges and immunities of ECSC treaty.
  
  • His salary was tax exempt!
• Question here: exemption with or without progression?

Question 9

Case Humblet? What did the Court state,

Answer 9

• This case follows a systematic approach how to interpret a legal provision = classical system of interpretation of legal norms.
• Court decided here: taxation of salary of EU officials should remain in the exclusive power of the EU → MS should not be able to interfere with the taxation of officials. They withdraw the sovereignty of the MS to tax them themselves = total exemption from national taxation.
• Important also that all EU officials receive equal treatment as far as their salary is concerned because if not, that would make it harder for EU to recruite from certain MS.
• Court started with a broad assumption that even indirect tax burdens are to be avoided and the court tried to support this argument by other interpretative arguments. Not all arguments are convincing.

Question 10

Result Case Humblet?

Answer 10

• Result: the national rule of the 40% could not be applied on the basis of the 100.000 so no progression → Mr. Humblet’s income was taken out of the picture for the tax base and calculation of the tax rate. Result: only taxed at 20%.

Question 11

What are the different interpretation methods?

Answer 11

1. Textual interpretation: you start with the wording and then additional elements or factors of interpretation can come into place.
2. Historical interpretation: materials of the ECSC treaties, preparatory materials, drafts, amendments,… Here: no different result that comes out of it to show that there was a different common intent of the parties. The historical interpretation does not lead to any other result than the court had found on the basis of the wording which was rather wide interpretation.
3. Systematic and teleological interpretation

Question 12

Systematic and teleological interpretation

Answer 12

• Systematic = you look at the provisions around it, how do they relate to each other, are there any hints surrounding the provision.
• Teleological: what was the intention of the MS when they wrote the treaty and protocol. Very close to historical interpretation.

Question 13

Case Terhoeve: 1999: facts of the case

Answer 13

Mr. Terhoeve worked for a Dutch employer but he was detached on a secondment to the UK for 10 months. Question: what about his contributions to the Dutch social security scheme? He had a Dutch employer so he was compulsory connected to the Dutch social security system.

• Conflict between a domestic provision and an EU provision.
• European regulation: connection of a person to a social security system = coordinating regulation.
• Problem: calculation of social security contributions:
  
  • Problem: calculation of social security contributions:
• But: for an ordinary resident: the calculation of social security contributions was capped = there was a maximum where even if you earn more, you do not pay more contribution.
• If you moved around, you had separate tax assessments = each of them including a social security contribution. Problem: 2 systems and thus he had paid more than if he were just a resident.

Question 14

Case Terhoeve: 1999: Court

Answer 14

• Court: violation of free movement of workers under art. 45 and discrimination.
• Consequences in this case of the incompatibility of domestic provisions in the Dutch legislation with art. 45: “Domestic courts – and you can add cases where this is more the focus – and national administrations must apply EU law in its entirety and protects rights conferred on individuals where necessary disapplying any national provision which may conflict with it”.
  
  • But the Court wants to avoid that someone who relies on EU law is suddenly better off than someone who stayed at home in his own country. No discrimination but you cannot just be better all of a sudden.
• Result: you want a level playing field = you want the same treatment between cross-border movers and the ones staying in the country.

Question 15

Case Terhoeve result?

Answer 15

Result: level playing field between cross-border movers and the ones staying in the country.

Question 16

Indirect taxation:

Answer 16

• A lot of harmonization and a lot of case law so the treaty rules not so important anymore.

Question 17

Difference between direct and indirect:

Answer 17

1. Direct tax: Person who is determined by the legislator as taxpayer bears the economic burden of the tax.
2. Indirect taxes: Taxpayer is not the one who bears the economic burden but is able to shift that burden over to someone else: Eg. excise duties, VAT. Enterprises pay VAT to the state but the customers bears the burden.

Question 18

What are the things to analyze?

Answer 18

1. Who is the taxable person = the taxpayer = subjective or personal scope of application.
2. What is subject to that tax, which type of transactions = taxable event or objective scope
3. Tax base = what is the amount that is being subject to tax?
4. How high is the tax? = tax rate
5. Deduction of input VAT = only here.

Question 19

What is harmonized with VAT and what isn’t?

Answer 19

• VAT rates are not harmonized but there is a bit of movement here because there is now a standard minimum rate of 15%, 1 or 2 reduced rates (minimum of 5%).
• See at. 113 TFEU for harmonization
• Harmonized VAT: tax on certain output transactions = standard transactions: the sale or the supply of a good, the provision of a service by an enterprise that only hits added value at each stage of the production/distribution.
  
  • This is better than traditional turnover taxes because they hit every single transaction in a chain → problem: the longer the chain, the more taxes = cascade of taxes.