The Resource Tax expenditures, charitable giving, and the fiscal future of the European Union

Tax expenditures, charitable giving, and the fiscal future of the European Union

Label
Tax expenditures, charitable giving, and the fiscal future of the European Union
Title
Tax expenditures, charitable giving, and the fiscal future of the European Union
Creator
Subject
Language
eng
Summary
In the wake of the recent economic crises in Europe, policymakers, academics, and other commentators spoke repeatedly about the fiscal future of the European Union. Had the fact that the twenty-seven Member States of the European Union lacked a harmonized fiscal policy lessened or worsened the impact of the economic crises? Did these crises and the outcry that surrounded them mean that fiscal harmonization was now more or less likely than before? Would Member States forever shy away from fiscal union, or was it even more necessary after the Greek bailout to tie together the taxing and spending policies of the European Union? This paper argues that these current debates have ignored a significant development in the European Union, and that this development means that the budgets of the Member States are already more closely linked than has previously been recognized. This development, which this paper identifies as a "cross-subsidization effect", has emerged out of the tax expenditure jurisprudence of the Court of Justice of the European Union, where the Court struck down revenue-reducing direct tax provisions. By striking down these tax provisions, the Court did more than just require the Member States to amend their tax law. The Court effectively gave Member States a choice: either stop using your tax laws to subsidize your own residents, or extend that subsidy to residents of all the other Member States. Member States that chose the latter option end up subsidizing other Member States, thus linking the budgets of the European Union together. In order to illustrate the cross-subsidization effect, this paper focuses on four recent cases in which the Court considered charitable giving incentives, such as tax exemptions for charitable organizations and deductions for charitable donations. These charitable giving cases illustrate the cross-subsidization effect, and the Member State responses to these cases illustrate both the benefits and the costs of this development. The cross-subsidization effect may offer hope to policymakers interested in pushing the European Union toward greater fiscal harmony in that it suggests that Member States, including those outside the Eurozone, are closer to this goal than has previously been recognized, in that certain elements of their budgets are now interdependent. The Member State responses, however, hold a warning to policymakers. Although the revenue effects of the charitable giving cases are relatively small compared to recent amounts lost and spent in the economic crises, Member States have still pushed back strongly against the cross-subsidization effect that emerged out of these cases. The author argues that policymakers must consider the Member State responses to this effect, as well as the possible motivations underlying those responses, as they consider their next steps toward European fiscal union
http://library.link/vocab/creatorName
Faulhaber, L.V
Geographic coverage
  • European Union
  • Europe
Index
no index present
Language note
English
Literary form
non fiction
http://library.link/vocab/subjectName
  • tax expenditure
  • charities, donations to
  • harmonization of tax
  • ECJ case law
Label
Tax expenditures, charitable giving, and the fiscal future of the European Union
Publication
Extent
47 p.

Library Locations

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