| 19 October 2008
A little noticed judgement from the European Court of Justice last week cements
another brick in the wall of European tax harmonization.
Governments of member states such as the UK and Ireland stand firmly behind
their red lines, refusing to allow the EU to have 'competence' over fiscal matters
other than VAT, where the battle was lost a long time ago, and fighting against
the CCCTB (Common Consolidated Corporate Tax Base) while, through the back door,
the ECJ is quietly colonizing their tax systems, bit by bit tying them down
with gossamer rulings which they hardly notice, but which will one day render
them immobile.
The latest ruling, by Advocate General Mengozzi, states that the German tax
authorities were wrong to disallow a tax deduction for a charitable donation
by a German citizen because the beneficiary organisation was located in another
member state. His opinion argues that less favourable tax treatment for cross-border
donations may discourage people from making such donations and found that the
German legislation constitutes a restriction on the movement of capital within
the single market.
Almost all countries give tax deductions for charitable donations, but most
of them set hurdles in the path of people who try to claim for donations made
to foreign charities, or exclude them altogether. In some countries, the charity
is able to claim back basic rate income tax on donations, leaving the donor
to claim higher rate relief if appropriate. How will this work in a harmonized
EU? Surely the ECJ will say in due course that a Bulgarian charity should be
able to claim UK basic rate income tax on a donation made by a Brit? The Inland
Revenue will be apoplectic, but the logic is impeccable.
While we're on the subject, isn't it about time that the ECJ and or the EU
Commission itself did something about the practical impossibility of reclaiming
VAT paid on foreign services? If for instance an EU business hosts a sales meeting
in another member state, the VAT charged by the venue is theoretically reclaimable
by the buyer, but in reality the bureaucracy totally - and intentionally - prevents
this from happening, and needless to say, the buyer is unable to reclaim the
VAT through its VAT return. This is iniquitous, and is a glaring breach of the
freedoms incorporated in the EU Treaties.
You have been reading an entry on the following blog:
Jeremy Hetherington-Gore Unleashed
Jeremy tackles the difficult issues head on!
Contact: jeremy@lowtax.net
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