Member State sovereignty in the field of direct taxation – is the failure of the Court of Justice in some instances to provide a consistent and coherent scheme of analysis of alleged restrictions to the exercise of the freedoms of movement a consequence of activism, error or both?

Competence in the field of direct taxation has not been ceded to the Union by the Member States except as regards selective areas in which harmonisation measures have been made. Because of the way in which nation states define their respective taxing jurisdictions, it is almost inevitable that national taxing provisions applicable to cross-border situations will be in conflict with the Treaty freedoms of movement unless carefully crafted to avoid infringement of those Treaty rights. This thesis explores incidences where the Court’s analysis of such conflicts has produced confusing rulings with a view to determining, on the balance of probabilities, whether such rulings are the result of ‘activism’ on the part of the Court seeking to perfect the Internal Market or whether such rulings result from misunderstandings of the national provisions under examination and error in its analysis of the conflicts. The conclusion reached is that the evidence points towards misunderstandings and error. A further conclusion reached is that the reluctance of the Court to modify or correct a previous ruling when a new situation examined by it highlights the shortcomings or errors of a previous ruling undermines the principle of legal certainty and interferes with the Member States’ sovereign right to design and impose their individual schemes of taxation.