Kerckhaert-Morress and the U.S. Internal Consistency Test Presentation for the University of Heidelberg 6.16.22.pptx
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This document outlines the structure and methodology of a research paper that will apply a US Supreme Court test for tax discrimination to cases decided by the European Court of Justice. The paper will simplify the facts of key ECJ cases dealing with double taxation and apply a 4-prong test developed in Maryland v. Wynne to determine if the outcomes would differ. It identifies several relevant ECJ cases and justifies their selection based on citations. The methodology section explains that the test will not change the ECJ case facts but will analyze whether applying the US internal consistency requirement would lead to different results.
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Kerckhaert-Morress and the U.S. Internal Consistency Test Presentation for the University of Heidelberg 6.16.22.pptx
- 1. An Internal Consistency Test For Europe: A Comparative Analysis To U.S. Case Law Charlie Lincoln
- 2. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 3. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 4. Research Question Why does the European Union allow state protectionist measures often leading to double taxation to exist? EU: Kerckhaert-Morres (2004) case and its implications allowing double taxation US: Wynne v. Maryland (2015) case not allowing double taxation What would happen if the EU Kerckhaert-Morress case (and other cases) used the Wynne rule? Would the result differ?
- 5. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 6. KERCKHAERT-MORRES (2004) SIMPLIFIED FACTS DIVIDENDS OF 100 100 subject to withholding tax 15% leaving France without regard to where the money goes Belgium levies tax at 25% of 100 without regard to where the money came from Commercially friendly result would be Belgium forgiving French taxes or maybe France relieving Belgian taxes Actual result is the 100 being taxed at 15% and 25% total 40% - double taxation
- 7. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 8. SIMPLIFIED FACTS OF MARYLAND V. WYNNE DIVIDENDS OF $100 Withholding tax of 15% on $100 leaving Utah without regard to where the money goes Maryland levies tax at 25% of $100 without regard to where the money comes from Commercially friendly result would be Maryland forgiving Utah taxes Actual result is the 100 Dollars being taxed at 15% and 25% total 40% - again double taxation
- 9. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 10. SIMPLIFIED US RULE First Prong: Substantial nexus requirement The commercial activity being subject to tax must have a substantial nexus to the jurisdiction taxing Second Prong: Fair appointment requirement The tax must be fairly apportioned and meet internal consistency test Third Prong: Nondiscrimination requirement The tax must not discriminate on interstate commerce Fourth Prong: Fair relation to services provided by the state requirement There must exist an reasonable relationship between the tax imposed by the state on the taxpayer and the services provided by the taxing jurisdiction
- 11. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 12. US TEST APPLIED TO KERCKHAERT First Prong: Substantial Nexus Analysis Here, it is likely that a court applying the substantial nexus requirement would meet the requirement of having met a substantial nexus because the dividends subject to tax originated in France and are sent to a Belgian resident. Second Prong: Fair Apportionment Requirement Here, it is likely that a court applying the fair apportionment requirement would likely find that the tax is fairly apportioned. However, the analysis does not stop here. The key question in fair apportionment is the question of the internal consistency test. The internal consistency test hypothecates a situation where every state in the Union adopts a similar tax regime If such was the case, then no country in the European Union would provide for double tax relief because the domestic provision referred to in the tax treaty no longer existed. Thus no need to go to other tests it already failed.
- 13. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 14. REPLICATE THIS TEST FOR OTHER CASES Case C-513/04, Kerckhaert & Morres v. Belgium, 2006 E.C.R. I-10967 Case C-128/08, Jacques Damseaux v. Belgian State, 2009 E.C.R. I-06823 Case C-67/08, Margarete Block v Finanzamt Kaufbeuren, 2009 E.C.R. I-883 Case C-336/96, Gilly v. Directeur des Services Fiscaux du Bas-Rhin, 1998 E.C.R. I-2793 C-403/03, Egon Schempp v Finanzamt M端nchen, 2005 E.C.R. 1.6421
- 15. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 16. WHY THESE CASES? Effectively now, the ECJ operates as a common-law court. Thus, the quantitative value of citation plays a key role. The thinking to decide these cases in the following syllogism: 1. The common law system of stare decisis depends on how important a cited term is. This frequently depends on the number of citations. 2. The ECJ is a common-law court. 3. Thus, given that the ECJ is a common law court, a practitioner before the court and academic must look to the number of citations both in tax literature and more importantly within the court itself to decide which cases are most important.
- 17. EMPIRICALLY THESE ARE THE CASES Additionally these reasons: (1) because they use a specific phrase parallel exercise of taxing power (get the exact phrase.) more specifically Gilly is the first representation of this rule and Kerckhaert has similar facts to Wynne. (2) these cases only work with individuals and personal income (not other items of income) thereby limiting the scope of this dissertation. (3) They represent the disparities causing double taxation within the context of individuals and personal income tax. (4) Went on Westlaw, used the phrase double taxation and parallel exercise of taxing power, and found these cases to be cited the most.
- 18. BY THE NUMBERS At the time of writing this dissertation: The Court of Justice cited the Kerckhaert case 35 times; by the General Court 1 time; by the EFTA 2 times. This means EU courts have cited Kerckhaert 38 times. The Court of Justice cited the Damseaux case 16 times; and by the General Court 1 time. This does not include the original case itself. This means EU courts have cited Damseaux 17 times. The Court of Justice cited the Gilly 85 times; the EFTA Court cited Gilly 6 times, and the General Court cited it once. This does not include the original case itself. This means EU courts have cited Gilly The Court of Justice cited Margarete Block 17 times; by the General Court 12 times; by the Civil Service Tribunal 2 times; and by the EFTA Court 1 time. This means EU courts have cited Schempp 32 times. The Court of Justice has cited Schempp 48 times; by the General Court 1 time; by the Civil Service Tribunal 1 time; by the EFTA Court 1 time. This means EU courts have cited Schempp 51 times.
- 19. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 20. Research Methodology This dissertation takes specific cases from the ECJ. The cases are picked based on citations within the court and within citations in the tax literature. Those case facts will remain unchanged but this dissertation will test those cases with the rule outlined in the Wynne v. Maryland (2015) US Supreme Court case. The results will determine whether the ECJ cases would turn out different results. If the result is positive, then this test provides evidence the rule could benefit the EU. If the result is negative, then this test provides evidence the rule may not benefit the EU.
- 21. DISCLAIMER OF A MISSING CASE There could be a singular case that applies the internal consistency test without using that phrase. A rose would smell as sweet by any other name Shakespeare.
- 22. TABLE OF CONTENTS Research Questions Kerckhaert-Morres (2004) Simplified facts Simplified facts of Maryland v. Wynne Simplified US rule US Test applied to Kerckhaert Replicate this test for other cases Why these cases? Research Methodology Contribution to Field
- 23. Contribution to Field Comparative law tradition Similar to how European polities adopted the Byzantine Code of Justinian (Corpus Juris Civilis - 凌旅僚旅略僚竜旅凌 ﾎ肝肯採穎) and applied it to the facts occurring in their courts, what would happen if the ECJ adopted the US internal consistency test? Only three publication discuss the ECJ adopting internal consistency in depth: De Vijver - International Double Taxation in the European Union: Comparative Guidelines from Switzerland and the United States (2017). Jasper Korving Internal Market Neutrality (2019) Ruth Mason, Made in America for European Tax: The Internal Consistency Test, 49 B.C. L. Rev. 1277 (2008)
- 24. DE VIJVER - INTERNATIONAL DOUBLE TAXATION IN THE EUROPEAN UNION: COMPARATIVE GUIDELINES FROM SWITZERLAND AND THE UNITED STATES (2017). My summary of De Vijvers article barebones: 1. That US Supreme Court has XYZ powers/competences. 2. ECJ has XYZ powers/competences. 3. US Supreme court also has ABC powers/competences. 4. Therefore, because (1) and (2) are similar, (3) should prove that ECJ also has ABC powers/competences. For me, just because (1) and (2) are similar does not prove (3)s ABC powers/competences should also apply to the ECJ for step (4). I think De Vijvers (4) step does not logically follow or at least is a big stretch. I think it is a false equivalence. The US Supreme court does not have a par all lack of competence like the ECJ does. Such a conclusion is likely a false equivalence; having similarities of some competences does not lead to similarities of other competences. However if one takes the conclusion of De Vijvers argument as true or at least desirable - then the internal consistency test could potentially lead to a potential way to resolve double taxation brought up by disparities.
- 25. RUTH MASON, MADE IN AMERICA FOR EUROPEAN TAX: THE INTERNAL CONSISTENCY TEST, 49 B.C. L. REV. 1277 (2008) Mason proposes a similar central question that this dissertation proposes: What would happen if the ECJ adopt the internal consistency test in tax cases. Under this approach, developed by the U.S. Supreme Court to analyze state tax discrimination claims under the Dormant Commerce Clause, the ECJ would ask: If all twenty-seven member states enacted the challenged rule, would intra-Community commerce bear a burden that purely domestic commerce would not also bear? Differences between this Ph.D. dissertation and Masons article: 1. The presence of Wynne as a key case to distinguish Kerckhaert, and 2. This Ph.D. dissertation engages in an extensive comparative law analysis testing each of the ECJ cases chosen for this analysis and applying the internal consistency test to the facts of the ECJ cases.
- 26. JASPER KORVING - INTERNAL MARKET NEUTRALITY (2019) Korving applies the internal consistency test in relation to market neutrality in his dissertation. Key contention with the US internal consistency test: Korving is not confident such changes would lead to differing results. It may change the result of the Kerckhaert case. But there would still be issues with the overall tax framework because certain disparities may still exist. Differences with this Ph.D. dissertations goals: Limited in scope: Korving does not go into detail about how the internal consistency test is tested in relation to the dormant Commerce Clause in the US. Less testing: Korving does not test it extensively. Korvings is valuable because he recognizes the need for testing the internal consistency test. Thus, his dissertations portion discussing the US rule acts as a staging point.