EU Tax Authority?

1. COMMERCE CLAUSE
FOR EUROPE?
• IN REGARDSTO
BROADER POLICY
IMPLICATIONS OF AN
INTERNAL
CONSISTENCYTEST

2. DISCUSSION
EU: Kerckhaert-Morres
(2004) case and its
implications allowing
double taxation
US: Wynne v.
Maryland (2015) case
not allowing double
taxation
Should Europe adopt
a similar restriction
based in the
Commerce Clause?

3. KERCKHAERT-MORRES (2004) SIMPLIFIED FACTS
DIVIDENDS OF 100 EUROS
Withholding
tax 15%
leaving
France 100
without
regard to
where the
money goes
Belgium
levies tax at
25% of 100
without
regard to
where the
money goes
Commercially
friendly result would
be Belgium forgiving
French taxes
Actual result is the
100 Euros being
taxed at 15% and
25% - double
taxation

4. PROCEDURAL
POSTURE
• Question to the court:
• Does this type of double taxation violate the TFEU?

5. ECJ OPINION
• EUTreaty Freedoms do not stop Member States from
“parallel exercise of taxing jurisdiction,” even if it leads
to double taxation
• not a restriction of the free movement of capital

6. POLICY BEHIND CASE
• Court maybe got it right because the court did
not want to legislate from the bench.

7. COMPTROLLER OF TREASURY OF
MARYLANDV. WYNNE, 135 S. CT. 1787
(2015).
MARYLAND’S TAX SCHEME AS A WHOLE ENDED UP WITH DOUBLE
TAXATION

8. DIVIDENDS OF 100 DOLLARS
Withholding
tax 15%
leaving Utah
without
regard to
where the
money goes
Maryland
levies tax at
25% of 100
without
regard to
where the
money goes
Commercially
friendly result would
be Maryland
forgiving Utah taxes
Actual result is the
100 Dollars being
taxed at 15% and
25% - again double
taxation

9. COMMERCE
CLAUSE IN THE
UNITED STATES
CONSTITUTION
• [The Congress shall have Power]To regulate
Commerce with foreign Nations, and among the
several States, and with the IndianTribes
• — Article I, Section 8, clause 3

10. COMMERCE
CLAUSE
ANALYSIS –
SPECIFICALLY
INTERNAL
CONSISTENCY
TEST
• History of US tax going back to the 1780s
• Test asks whether interstate and intrastate commerce
would be taxed equally if every state were to adopt
the precise tax scheme at issue
• Maryland’s tax failed the test

11. FAILURE OFTHE
”INTERNAL
CONSISTENCY”
TEST
• The Court reasoned the unfavorable treatment of
interstate commerce was “not simply the result of [the
Maryland tax scheme’s] interaction with the taxing
schemes of other states” but inherent in the tax
system.
• As such, Maryland’s scheme effectively “operate[d] as a
tariff.”
• And “[t]his identity between Maryland’s tax and a tariff
is fatal because tariffs are ‘the paradigmatic example of
a law discriminating against interstate commerce.’”
i.e., the internal market of the US.

12. SOLUTIONS
• Commission’s idea: use treaties to determine which state
must relieve double taxation
• This is not working yet
• EC legislator creates a European framework for the
division of taxing rights
• Writing a commerce clause
• EU tax authority
• Multilateral treaty instrument
• Everyone/majority signs
• ECJ could try to place the “blame” on a state to relieve
double taxation (without the former solutions)
• This is not working yet

13. NEW DEAL FOR EUROPE?