D Case
Most favoured nation doctrine
The obligation of the individual member states to respect the principle and the provisions of the European Community Treaty, prohibits incorporating provisions into tax conventions with non Member States which put a non Member State in a more advantageous position than a Member State not involved or in a convention with a Member State, incorporating a provision which is more advantageous than a similar one in a convention with another Member State, but Member States are not obliged to grant benefits to nationals and residents of other Member States which have been granted to nationals and residents of a Member States under bilateral tax conventions as far as these benefits offer more than the benefit which have been granted on the basis of Community law. The basis for this reasoning can be infer in the special nature of a bilateral tax convention between Member State and a third state or another Members State since such an agreement is the result of a negotiating process between two states by which the rights and obligations are laid down on the basis of the reciprocity principle.
The Commission and the Court of Justice take the view that the Member States have an extensive freedom of policy and the principle of subsidiarity restricts the influence of the European Community on direct taxation also on the area of tax conventions. There is an even stronger argument in the Bachman case, the Court of Justice turned down the application of a mutual most favoured nation principle in the field of tax conventions on income and capital between Member States.
“It is true that bilateral conventions exists between certain Member States, allowing the deduction for tax purposes of contributions paid in a contracting state other than in which the advantage is granted, and recognizing the power of a single state to tax sums payable by insurer under the contracts concluded with them. However such a solution is possible only my...
Please login to view the full essay...