The effect of European law on direct taxation

Posted: January 24, 2007

Download Full Article: The effect of European law on direct taxation (December 2006).pdf

Introduction
In his valedictory article in the British Tax Review, Sir Andrew Park (formerly Mr Justice Park) stated, ‘All of the questions which arise about the impact of Community law on UK corporation tax are not remotely resolved yet… In my opinion the subject has been by some distance the most important and stimulating aspect of tax law which I have encountered over the period of more than 40 years in which I have been involved in the field, either as a practitioner or as a judge.’  Of course, European law affects more direct taxation than merely corporation tax, so while considering the effect to date of Community rules on corporation tax this paper will take a broader look at the United Kingdom tax system and suggest other possible weaknesses in it.
However, the scope of this paper has some limits. European law has both ‘hard’ and ‘soft’ effects on direct taxation. ‘Hard’, deriving from the application of existing European law to the exercise of Member States’ retained powers within the field of direct taxation; ‘soft’, in connection with initiatives within the European Union, such as the proposals for a common consolidated basis of assessment for corporation tax, that seek to persuade Member States to reach further, supranational agreements in the area. This paper is confined to the former; the latter are for another day.

(Continued. For full paper please download using link at the top of the page.)