The Economic Effects of EU Tax Jurisprudence

(2016) European Law Review 41(1), 44-71

32 Pages Posted: 4 Nov 2019

See all articles by Rita de la Feria

Rita de la Feria

University of Leeds

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Date Written: February 1, 2016


The aim of this paper is to propose a new framework to assess the impact of Court of Justice of the European Union (CJEU) jurisprudence on the construction of a European Internal Market, by considering whether the jurisprudence of the Court on corporate taxation fulfils the mandate set-out in the European Treaties for establishing such a market. It is shown that the Court’s focus upon removing discriminatory obstacles to the fundamental freedoms does not necessarily lead to a more level playing field and increased tax neutrality, an instrumental objective towards attaining a European Internal Market. In order to assess the impact of the jurisprudence of the Court upon neutrality and level playing field, the decision in Lankhorst-Hohorst, regarding the compatibility of thin capitalisation rules with free movement provisions, will be used as case study. An economic analysis demonstrates that, depending on the reaction of Member States to the ruling, tax induced differences in capital costs faced by firms operating within the European Internal Market may increase, whilst GDP and welfare may decrease. Consideration of actual legislative amendments introduced to thin capitalisation rules by Member States following Lankhorst-Hohorst, appear to indicate that it is this negative scenario which has prevailed. Results demonstrate that it is not always or necessarily the case that decisions of the CJEU will led to an increased level playing field and tax neutrality, thus contributing to the establishing of a genuine EU Internal Market. The paper considers the constitutional implications of this conclusion, and the consequent breaking of the constitutional instrumental chain.

Keywords: European Law, Public Economics, Tax, Court of Justice of EU

Suggested Citation

de la Feria, Rita and Fuest, Clemens, The Economic Effects of EU Tax Jurisprudence (February 1, 2016). (2016) European Law Review 41(1), 44-71, Available at SSRN: or

Rita De la Feria (Contact Author)

University of Leeds ( email )

School of Law
Liberty Building
Leeds, LS2 9JT
United Kingdom

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich

Poschinger Str. 5
Munich, DE 81679
++89-9224-1430 (Phone)

Ludwig-Maximilians-University, Munich ( email )

Schackstrasse 4 / II
Munich, DE 80539

Center for Economic Studies (CES) ( email )

Schackstr. 4
Munich, DE 80539
++89 2180-2748 (Phone)
++89 2180-17845 (Fax)

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