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Unpublished Paper
The “Labyrinth Of Impossibility” in the Tax Cases of the European Court of Justice: Is the Comparability Analysis a Way Out?
ExpressO (2012)
  • Carlo Garbarino, University of Michigan - Ann Arbor

Can the jurisprudence of the European Court of Justice in tax cases be rationally expounded? The article suggests that a strategy that relies on a bottom-up evolutionary approach. I pursue this strategy by analyzing a broad sample of the tax cases of the ECJ. These cases are viewed from the perspective of what I call “comparability analysis”, i.e. a process adopted by the Court to compare relevant domestic and cross-border situations to decide whether there are differentiated treatments. The cases of the sample are selected on the basis of a set of criteria aimed at identifying the issues that are the crucible of the decisions of the Court in the taxation of capital, i.e. of companies and their stakeholders.

The reliance on a significant sample of cases makes it possible, in the first part (sections 1 through 6), to describe how the Court has established criteria tailored to different cross-border activities and transactions to determine whether two situations are comparable. I revert to the normative issues at the end of the article, where I show that, although with a few exceptions, the Court has developed a remarkable set of criteria that enable the perplexed interpreter to untangle the apparent overlapping of canons for comparability. I claim that this system of comparables provides a way out, albeit a partial one, of the “labyrinth of impossibility” through a gradualistic approach based on a straightforward equal protection principle rather than one or more overarching efficiency principles (sections 7 through 11).

The article is organized as follows. After a preliminary clarification of a few definitions needed to understand comparability analysis I show that the core of the equal protection clause is constituted by the criteria to define whether two situations are actually comparable (in short the “comparables”), and thus that comparability analysis is really the crux of the matter, the core of the judicial reasoning of the Court in tax cases (sections 2 and 3). After that I provide a thorough survey of the comparables established by the Court (sections 4, 5 and 6). According to that survey there are in total eighteen comparables used by the Court: each of them will be described in its structure and a brief review of the cases that have used that comparable will be provided. The survey is not a theoretical overlay but an empirical description of the judicial activity of the Court. It does not tell how the comparable ought to be, but how the Court uses the comparables and in what contexts, and shows that there is a specific relationship between each comparable and the situations to which it is applied, so that a canon of comparability can be basically found for all situations.

The final part of the paper (sections 7 through 11) relies on the empirical descriptive work developed in the previous sections and addresses the criticisms that have recently surfaced in the current U.S. legal discourse on the tax cases of the ECJ. In that final part I propose a two-step “gradualistic approach”, that shows that the Court expanded the application of the equal protection clause to it broadest extent, and in doing so it paved the way for proactive action by the EU in tax and fiscal integration, possibly based on reinforced cooperation. The equal protection clause thus is the legal basis for levelling the playing field in the EU, but cannot be considered as the tool for actual tax coordination, as political action is needed at EU level to achieve such coordination.

  • Court of Justice,
  • tax cases
Publication Date
November 23, 2012
Citation Information
Carlo Garbarino. "The “Labyrinth Of Impossibility” in the Tax Cases of the European Court of Justice: Is the Comparability Analysis a Way Out?" ExpressO (2012)
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