Limits to Tax Planning

S. 523 1. Introduction

Direct taxes have only been harmonised to a very limited extent within the European Union. The Court of Justice (hereinafter “the ECJ”) has been playing a significant role in the harmonisation process; however, its case law represents negative harmonisation. Its judgments can lead to suppression of national rules which are at variance with EU law but cannot create new common rules as such. Positive harmonisation in the form of directives, which would set up common standards throughout the EU, has been very limited so far. To date, there are merely three directives prescribing the tax treatment of European intra-group reorganisations, dividends and royalty payments. Nonetheless, the Commission has actively been working on drafting a directive on a Common Consolidated Corporate Tax Base (CCCTB) since 2001 which would create a major step towards positive harmonisation of direct taxes, if adopted eventually. However, Member States seem – for various reasons – to be sceptical about this idea. As a result, after more than ten years of negotiations the CCCTB Directive still remains only a proposal the latest version of which stems from 2011. In addition, significant change...