Tax mobility within the EU: the quest for a new European Nomos

It is universally known that the approach towards tax law has always been characterized by strong differences between indirect and direct taxation. The need for harmonization concerning the system of value added tax, for the uniformity regarding customs law and for a similar framework in the field of excise duties, still cope with a secondary Community legislation in the field of direct taxation that is fragmented, incomplete and episodic. This is the result of a necessary compromise imposed by a decision-making model which is no longer compatible with the zeitgeist of the new millennium. From this point of view neither the Charter of Nice nor the new European Constitution in Rome (even the abridged version that has prevailed at the latest meeting in Berlin) appear to be adequate to change this approach. Interventions in the field of direct taxation, both for individuals and for certain businesses, such as trading companies and permanent establishments, are focused on areas in which bilateral treaties did not provide an adequate protection to the taxpayer, or where the contractual nature of the instrument clearly demonstrates an intrinsic inadequacy. Thus, the 1990/435/ EEC [2], 2003/48/EC [3], 2003/49/EC [4] and, of most interest here, the 1990/434/CEE [5] directives came to light, among others. Leaving aside the crucial role played by the European Court of Justice on the progressive removal of barriers to a common market and, indirectly, the approximation of laws in those areas that clash with a more effective harmonization, it remains that all the above-mentioned instruments still show an unmistakable common characteristic: they are all oriented to minimize the occurrence of double taxation on passive income. Dividends, interest and royalties now benefit from an EU framework intended to apportion the taxing powers amongst the different States potentially interested (State of residence of the payee and the payer, for instance). The only exception in this respect is the one related to the regime of capital gains. If arguably practical reasons have excluded such a need in the case of realization of capital gains determined by the sale of securities or other property, the EU legislator was concerned with this issue only when taxation of capital gains do not guarantee the neutrality imposed by the Treaty (in general) and the fundamental freedoms laid down and protected by it. In this context, reference was made to specific extraordinary corporate operations (mergers, divisions and transfers of assets, for example) suitable to generate capital gains taxable in two European states at least, considering as such the States where the companies involved are placed, or where the assets are dislocated. With the last mentioned Directive, 1990/434/CEE (so called “Parent – Subsidiary), the EU lawmaker has confirmed this need for tax neutrality for the above-mentioned corporate operations, giving the full fiscal neutrality to extraordinary corporate reorganization that could generate potentially taxable gains. This is true especially in cases where a company was, for example, merged with another resident in another European country, ending up with the former which had to leave its residence in the State of origin (even in this case would be more appropriate to conclude that it was actually winded up to all relevant effects). Among the cases classified as “extraordinary” in the Directive, the simple transfer of registered office of the company is never mentioned despite it could be considered an extraordinary corporate operation from the point of view of many legal systems, including the Italian one, where it is not entirely prohibited (such is the case for the Netherlands). Even if we ignore for now the taxation of individuals, a tax loophole seems already to emerge. In recent years doctrine, jurisprudence and the European Commission have tried to provide an adequate response to it. This is the problem of the so-called “Exit taxes” as introduced by the scientific literature with respect to its possible incompatibility with EC law, and confronted by the EU Commission in a quite original way. The problem that we raise in this short survey, apart from the comment of the ECJ case law which was discussed elsewhere, is the mobility within the EU and the relevance of such income transfers, whether they involve individuals or corporate entities, or both. In this perspective the question is undoubtedly peculiar: it pertains not only to a case of income transfer, but rather to a sort of “trans-nationality” involving, on the one hand, the status of the taxpayer (who belongs at the beginning to a State and subsequently to another within the EU, and on the other hand, whether one or both States attach importance to the transfer of residence abroad, up to what amount of his/her taxable base can be taxed in the former or in the latter, perhaps in a later time. The transfer of registered office or residence from one State to another is still, under many circumstances, comparable to the realization of unrealized capital gains on specific assets, according to the State in question. The taxation of capital gains is sometimes carried out (especially following the case law cited above) in a subsequent moment (maybe in a different tax period and in coincidence with the effective realization of the asset on the market) while other times, as still happens in the Italian system, it even coincides with the transfer of headquarters abroad, at least for corporations. In brief, what seems to emerge from this partial reconstruction is a framework in which every European country makes its own tax claim potentially different from those of other countries with respect to the same situation. The absence (or apparent absence) of specific rules to regulate mobility within the Union in terms of taxes emphasises the potential conflict between States, and therefore international double taxation within the EU, as mentioned above. From this array of mutually-conflicting claims, there are two certainties: first, that in a system such as the current one, corporate and personal mobility is still strongly affected, in terms and conditions, and arguably not consistently with the provisions of the Treaty, and secondly, that something has been lost (or perhaps never acquired by the Union, namely what in taxation could be revised as Nomos of tax territoriality.