Can Tax Authorities Scrutinise the Ideas of Foreign Charities? The ECJ's Persche Judgment and Lessons from US Tax Law
The European Court of Justice's (ECJ's) recent Persche judgment poses important questions about the relationship between taxation of gifts and charitable purposes in the light of EC law requirements. This article argues that by applying its established case-law to the matter of donors to foreign recipient bodies, the ECJ takes a position on the social role of both charities and tax deduction. Moreover, the position of the ECJ clearly paves the way for tax authorities to check the objectives and the values pursued by recipient bodies seeking tax-preferred status, a situation that recalls a similar power recognised under specific circumstances of the US Internal Revenue Services. Arguably, the ECJ case-law has more profound consequences on charitable action, since it seems that the power accorded to tax authorities of the Member States to check the purposes of charitable organisations leads to a cosmopolitan apprehension of charitable action while it pushes charities to enhance transparency in their activities.
The New Tax Information Exchange Agreement: A Potent Weapon Against U.S. Tax Fraud?
On October 2, 1996, after sixteen (16) years of negotiation, the U.S. signed a new tax treaty with Switzerland ("1996 Agreement"). The seventh and final category of eligible persons is a specific family foundation under Swiss law. In the fifth hypothetical, the taxpayer essentially undertakes the same transaction as in the previous two examples (examples 3 and 4), but the taxpayer does not keep records of receipts or expenses, and all the relevant information is told to authorities by an informant who specifically states that the individual told the informant that the taxpayer has been underreporting his or her income. More recently, however, money laundering and organized crime have subverted this underlying, noble purpose of Swiss banking secrecy. As a result, the new law appeases international pressure on Switzerland to relax its banking secrecy laws, eliminates conflicts currently existing in Swiss law concerning banking secrecy, and provides an increased deterrent to money laundering. However, with the renewed effort at information sharing between Switzerland and the U.S. stemming from the 2003 Agreement, it will be harder for terrorists or persons wishing to commit tax fraud to conduct their business in Switzerland because the Swiss are now not so willing to protect these people from the wrath of the U.S. ...
A light in the darkness: Recent developments in the ECJ’s direct tax jurisprudence
This article will examine the Court’s case law from 2001 to 2007 in one of its most challenging and, due to national sensitivities about tax sovereignty, controversial areas of competence at present: its application of the Treaty free movement rules to national direct tax provisions. First, the article will focus on the Court’s evolving approach to the question of which national tax rules amount to a prima facie breach of the free movement rules – in particular, the Court’s shift from defining breach purely in terms of “restriction” to a discrimination-based approach. Second, it will consider developments in the Court’s attitude to justifications for prima facie breaches of Treaty free movement rules, including the nebulous concept of justification on grounds of “fiscal cohesion”. Finally, it will look at the application of the EU citizenship rules to national tax rules, and the Court’s stance on remedies where national tax rules contravene Community law. Its conclusion will be that, after a substantial period of uncertainty, the Court seems to be moving away from a pure restriction-based approach, towards a more predictable and logical system distinguishing between those restrictions of free movement which should be prohibited by the free movement rules (restrictions resulting from the discriminatory rules of one tax jurisdiction) and those restrictions which, as inevitable consequences of national tax sovereignty, should not fall within the scope of the free movement provisions at all (restrictions resulting from the interaction between two different tax jurisdictions).