Revisiting “Schumacker”: The Role of Limited Tax Liability in EU Law

Abstract

Limited liability to taxation is one of the classic outcomes of the self-restraint of the power to tax by a Sovereign State. According to the mainstream literature, a State can exercise its own taxing power in full only insofar (and insomuch) taxpayer is qualified by a personal link with its territory. Apparently, the Schumacher case overturned this traditional way of applying taxes in an international context, ruling that residents and non-residents can be compared in specific circumstances, and also that an individual with a limited liability to tax in a (Member) State does qualify for specific tax provisions intended to be applicable to residents only in that Country.

Rather than constituting an revirement of one of the pillars of International taxation, the Schumacher decision was greatly influenced by the circumstances of the case, ultimately justifying the extensive application of the non-discrimination principle in that situation.

The article is aimed at tracing the development of the Schumacher doctrine after the leading case, arguing (and providing evidence in the sense) that the decision taken by the European Court of Justice in similar cases were also (although perhaps unconsciously) influenced by the progress in the EU harmonization. The faster the EU making process speeded up, the more the ECJ was keen to use the non-discrimination principle in a way to foster the harmonization. On the other side, the more the process was slowed down, the more reluctant the ECJ was to extend the protection from discrimination to individuals (or legal entities) not fully liable to tax in one of the Member States