CJEU - Recent Developments in Direct Taxation 2020

S. 1121. Introduction

The Austrian cases discussed in this paper challenge recently introduced Austrian legislation that adjusts family allowance payments and family tax credits granted to parents resident in Austria with children living in another EU or EEC Member State or Switzerland, based on the children’s actual cost of living. The indexation of family allowance payments also affects non-residents with children living abroad.

Although at face value the mechanism applies irrespective of the parents’ nationality, its introduction was accompanied by a heated political and scientific discussion regarding the legality and fairness of such an instrument. It was presumed that the measure would mostly affect non-nationals, and negatively at that. Additionally, it may be criticised that downward adjustments of Austrian family allowance payments disproportionately affect low income households for whom the benefits make up a considerable part of the family budget.

The concept of adjusting family benefits based on the costs of living in the child’s country of residence first gained widespread attention in the context of the British renegotiation deal concluded on 19 February 2016. As a compromise ...