The average number of new tax cases sent to the Court of Justice of the European Union (CJEU) has risen by a fifth since the credit crunch, as more businesses and other taxpayers use the court to challenge the actions of national tax authorities, says Pinsent Masons, the international law firm.
Pinsent Masons says that between 2005 and 2010, pre-credit crunch, there were 50 new tax cases per year on average brought to the ECJ. Between 2011 and 2015, this rose to 61 per year, an increase of 22%.
Pinsent Masons explains that since the credit crunch, national tax authorities across Europe have been under intense pressure to increase revenues, leading many to levy extra charges and ensure they maximize tax take wherever possible. Businesses and other taxpayers who believe they are being taxed unfairly in the process, contrary to principles of EU law, can bring a challenge to the CJEU.
Pinsent Masons explains that the CJEU has ruled in favour of business claimants against national tax authorities in several high-profile cases, enabling millions in overpaid tax to be re-claimed.
Andrew Scott, Director at Pinsent Masons, the international law firm, comments: “The reach of EU law has widened considerably and continues to do so, with the result that an increasing amount of UK tax law is affected. More businesses and other taxpayers have therefore managed to find grounds for challenging UK tax law.”
“EU law has been used to contest a range of taxes levied by member states. EU anti-discrimination rules were used to over-rule the UK’s tax treatment of dividends paid by foreign subsidiaries of UK companies, for instance. It was argued that, in contravention on EU single market rules, they were being taxed more heavily than dividends from UK subsidiaries.”
Brexit vote result could mean further rush of tax cases to CJEU
Pinsent Masons says that the prospect of withdrawing from the EU, following the result of the EU referendum, means that more claimants may want to commence their proceedings while it is clear that EU law still applies in the UK.
Andrew Scott adds: “Although it’s business as usual at present, Brexit means that the power of the CJEU over UK law will end but at an unknown time in the future. UK claimants will therefore be considering whether to launch proceedings now so as to increase the likelihood that their claims are protected as and when the UK does leave the EU.”
“UK claimants might be concerned that, once it is out of the EU, the UK government will attempt without notice- as they have in the past- to remove the ability to bring a claim based on EU grounds even where EU law applied at the relevant time.”
(Source: Pinsent Masons)
