Sovereignty, Integration and Tax Avoidance in the European Union: Striking the Proper Balance

As the need to raise revenue becomes more pressing and public opposition to tax avoidance increases, the European Court of Justice has made it more difficult for the twenty-seven Member States of the European Union to prevent tax avoidance and shape fiscal policy. This article introduces the new anti-avoidance doctrine of the European Court of Justice and analyzes it from the perspective of taxpayers, Member States and the European Union legal order as a whole. This doctrine is problematic becasue it has created a legislative vacuum in Europe. No European Union institution has the authority to regulate direct taxation without the unanimous support of all twenty-seven Member States. As the European Court of Justice strikes down Member State efforts to prevent tax avoidance, no institution can step in to replace these Member State provisions. Member States are thus losing sovereignty over policy tax avoidance, but no legislative move toward an integrated approach is possible without the support of Member States. This article proposes several solutions to the problems posed by the doctrine