Flunking the ECJ’s Tax Discrimination Test


This Article argues that by applying a highly formalistic methodology to decide tax cases, the European Court of Justice avoids the challenge of weighing the harms of tax discrimination against the benefits to Member States in retaining autonomy over their tax systems. By eschewing normative analysis in favor of formalism, the Court engenders significant legal uncertainty both for taxpayers contemplating intra-Community investment and for Member States dependent on tax revenues. This uncertainty tends to undermine the very economic integration the prohibition on tax discrimination was meant to foster. This Article identifies the normative considerations that the Court could use to clarify the non-discrimination principle in tax cases. These include the desire to foster political and economic integration by curbing tax protectionism, tax exportation, tax preferences for nonresidents, and exit or other outbound restrictions.