¹ Reprinted in Stein, P.G., The Character and Influence of the Roman Civil Law, ch. 11, p. 151.Google Scholar

² Financial Times, 20 November 1972. The FT also reported that the King of Tonga had personally stormed the reef in full military uniform to raise the flag of Tonga in place of the Republican flag.

³ Stoke-on-Trent City Council v.B& Q p.l.c. [1991] 4 All E.R. 221 at 223.

⁴ Case C-221/89, R. v. Secretary of State for Transport, ex parte Factortame [1991] 3 All E.R. 769.

⁵ The House of Lords has now held that such undertakings are not required: Kirklees M.BC. v. Wickes Building Supplies Ltd. [1992] 3 All E.R. 717.

⁶ Groves, 1948 (1) National Tax Journal 1 at 23.

⁷ European Community Direct Tax Measures; announced by the Inland Revenue in a Press Release dated 17 December 1991, Simon's Tax Intelligence (1991). p. 1135.

⁸ Announced in Inland Revenue Press Release 16 December 1991, Simon's Tax Intelligence (1991), p. 1134.

⁹ See generally Gammie [1992] British Tax Review 148.

¹⁰ The report is still not published although its conclusions have been released—see Gammie, “The Ruding Committee: An Initial Response” Institute for Fiscal Studies Commentary No. 30(1992).

¹¹ The Institute has shown great generosity to the Cambridge Law Faculty by funding a post of Research Officer.

¹² Among the most important contributors have been two Cambridge law graduates, John Avery Jones of Speechley Bircham and Malcolm Gammie of Linklater and Paincs.

¹³ Directorate General XV deals with financial institutions and company law; Directorate B. Div. 1 deals with company tax and other direct taxation, taxation of enterprises, capital duty and taxes on transactions in securities. DG XV's previous responsibility for indirect tax was transferred to DG XXI. DG XXI also deals with customs union; Directorate C deals with indirect tax including elimination of internal fiscal frontiers and has three divisions: (i) VAT and other turnover taxes (ii) indirect tax other than turnover and (iii) elimination of fiscal frontiers and development of clearing system.

¹⁴ Mmc. Scrivener studied law, literature and psychology at Paris and has an MBA from Harvard.

¹⁵ Inventory of Taxes levied in the Member States of the European Communities, 13th ed. 1990.

¹⁶ Op. cit., p. 461.

¹⁷ Op. cit., p. 165.

¹⁸ Op. cit., p. 580.

¹⁹ Op. cit., p. 340.

²⁰ On validity see Commission v. France, Case 90/79, [1981] 3 C.M.L.R. 1.

²¹ Taxing Profits in a Global Economy, OECD 1991.

²² France, Denmark, Germany, Spain, Netherlands and Luxembourg: see OECD Survey, Taxing Profits in a Global Economy (1991).

²³ Austria, Norway, Sweden and Switzerland: OECD op cit.

²⁴ United Kingdom National Accounts: The CSO Blue Book (1991 ed.).

²⁵ Source: ibid., 1991 and 1981 eds.

²⁶ Council Dir. 77/388 (OJ 1977, L 145/1).

²⁷ And on the provision of spectacles, hearing aids etc., which resulted in legislation in 1990.

²⁸ See Council Dir. 77/388 (OJ 1977, L 145/1); Mathicssen, A Guide to European Community Law (5th ed. 1990), p. 105. Originally the rate was 1 per cent, but this was increased to 1-4 per cent, at the meeting of the European Council in Fontainebleau in 1984: Bull.EC 6-1984, point 11. The same meeting agreed that this was to be increased to 1-6 per cent, as from 1 January 1986: see Com(88) 99; this has not yet been implemented.

²⁹ Taxation in the Single Market, European Community 1991, p. 11.

³⁰ Deb, H.C. vol. 198 col. 33, 5 November 1991.Google Scholar Wonderfully, th e United Kingdom position was that no Directive was needed; the other eleven states wanted a Directive but the United Kingdom was willing to state that it had no intention of reducing the rate of tax: H.C. Deb. vol. 193 cols. 422-424; see now infra note 31.

³¹ Deb, H.C. vol. 218 cols. 755–756 w. (3 July 1992).Google Scholar

³² Across the Community reaction ranged from letting market forces rule in setting tax rates (something of interest to a physically protected market like the United Kingdom) to the view that even a 6 per cent, spread was too wide: see Taxation in the Single Market, note 29 above, p. 16.

³³ Finance Act 1988, s. 141. EC Directive 85/103 linked capital duty to the free movement of capita) and said that differing regimes affected investment decisions and distorted the market; it went on to direct a reduction to 1 per cent, or outright abolition.

³⁴ See the Finance Act 1990, s. 125.

³⁵ On the non-tax aspects see Council Regulation 2137/85 which has direct effect. Matters of nontax detail are contained in European Economic Interest Groupings Regulations, S.I. 1989/638.

³⁶ Income and Corporation Taxes Act 1988, s. 510A added by Finance Act 1990, s. 69 and Sch. 11.

³⁷ Income and Corporation Taxes Act 1988, ss. 468A to 468D added by Finance Act 1989, s. 78.

³⁸ The reason for this was to provide what the Commission calls “transparency;” the entire burden of the corporate tax at the unit trust level would be available to unit holders as a credit who would thus have the same tax burden as if they had held the underlying assets directly.

³⁹ Income and Corporation Taxes Act 1988, s. 468E added by Finance Act 1990, s. 51.

⁴⁰ Inland Revenue Press Release 20 March 1990, Simon's Tax Intelligence 1990, p. 249.

⁴¹ See generally OECD Survey, Taxing Profits in a Global Economy, 1991, Tables 3.1 and 3.2, pp. 57 and 58.

⁴² There is a similar variety of methods of taxing dividends received from domestic subsidiaries; OECD Survey, op. dr., Table 3.3., p. 59.

⁴³ For an unofficial translation see IBFD: The EEC Reports on Tax Harmonisation (Amsterdam 1963). See generally Easson, Tax Law and Policy in the EEC (1980), paras 109-111, 255-257 and 268-314 and 1992 Canadian Tax Journal pp. 600-638.

⁴⁴ See OECD Survey, op. tit., Table 6.1 p. 164.

⁴⁵ 45 lntertax 1991, part 5, p. 249.

⁴⁶ OECD Survey, Taxing Profits in a Global Economy, 1991, p. 62.

⁴⁷ Op. dr., pp. 66-69.

⁴⁸ Op. cit.,p. 70.

⁴⁹ See Kuiper, , European Taxation, IBFD (Amsterdam 1988), p. 319.Google Scholar

⁵⁰ Op. cit. note 46 above, p. 117.

⁵¹ Similarly investment in machinery tends to be treated more generously than investment in buildings. However investment in inventories is generally discriminated against, often because purely inflationary increases in the value of inventories are taxed. The effect of taking personal taxes into account made no difference to the discrimination between the different forms of investment save that, on average, investments financed by retained earnings were now more favourably treated than investments financed by new equity.

⁵² In 1984 the capital allowances for plant and machinery had reached 100 per cent.; they now stand at 25 per cent, on a balance of pooled expenditure. In 1984 the initial allowance for industrial buildings stood at 75 per cent, of the cost of construction with a writing down allowance of 4 per cent. p.a. of the balance; today there is only the writing down allowance of 4 per cent. p.a. The corollary was a reduction in the rate of corporation tax from 50 per cent, in 1983 to 45 per cent, in 1984,40 per cent, in 1985 and 35 per cent, in 1986: Finance Act 1984. s. 19 and Sell. 12.

⁵³ Op. cit. note 46 above, Table 5.8 at p. 141. However see also the report of the Federal Trust— The Future of Corporate Tax in the European Community (1991)—which shows, with complete workings which any intelligent reader can follow, the different tax burdens borne by investors resident in one country and trading in another and has the added dimension of having an intervening company in a third country. It is confined to the European Community countries.

⁵⁴ It assumes that we have a subsidiary company financed as to one third by loans from its parent, one third by new equity and one third by retained earnings. The parent raises its share of the finance by a weighted average (not J each) of retentions, new equity and debt, spelt out at p. 127: 35 per cent, debt; 55 per cent, retained earnings and 10 per cent, new equity. The investment is made by the subsidiary in a weighted average of assets—machinery (50 per cent.), buildings (28 per cent.) and inventories (22 per cent.)—see p. 127. There is an assumption of a standard rate of inflation at 4-5 per cent.; personal taxes are not taken into account.

⁵⁵ OECD Survey, Taxing Profits in a Global Economy (1991), Table 5.9.

⁵⁶ On the state of discussions between the USA and the United Kingdom see a Joint Report published by the Inland Revenue and the US Treasury in December 1991.

⁵⁷ 90/435/EEC, OJ 90/L225, 20 August 1990, reprinted in Simon's Tax Intelligence [1990] p. 754.

⁵⁸ 90/434/EEC, OJ 90/L255, 20 August 1990, reprinted in Simon's Tax Intelligence [1990] p. 749.

⁵⁹ Com (90) 571 Final, OJ 90/C53, 28 February 1991, reprinted in Simon's Tax Intelligence [1991] p. 211.

⁶⁰ Com (90) 595 Final, OJ 91/C53, 28 February 1991, reprinted in Simon's Tax Intelligence [1991] p. 216.

⁶¹ 90/436/EEC, OJ 90/L225, 20 August 1990, reprinted in Simon's Tax Intelligence [1990] p. 757.

⁶² For a survey of problems in other countries see International Tax Review, January and February 1991.

⁶³ Th e exception relates to article 7(2) of the Directive—see Inland Revenue Consultative Document, note 7 above, p . 21, para. 3.5.

⁶⁴ E.g. Inland Revenue Consultative Document, note 7 above, paras. 2.4 and 2.5.

⁶⁵ Com (90) 595 Final, OJ 91/C53, 28 February 1991, reprinted in Simon's Tax Intelligence [1991] p. 216.

⁶⁷ Under conventional United Kingdom tax treatment there is complete recognition of the separateness of the subsidiary; there is therefore no recognition of the foreign subsidiary's profits or losses until they are remitted as dividends, interest or royalties. By the Income and Corporation Taxes Act 1988, ss. 747-756, an exception is made for certain controlled foreign companies in low tax areas but this is not relevant here. When the profits are remitted, credit is given for the foreign tax as before together with a credit for the foreign tax paid on the underlying profit.

⁶⁸ But not the only one: there is some risk that the United Kingdom might find itself compelled to give relief for losses of the foreign subsidiary even if the group as a whole is profitable—e.g., if other subsidiaries in other countries are making profits and not remitting them to the United Kingdom.

⁶⁹ On interpretation see Brown, Neville, Court of Justice of the European Communities (3rd ed. 1989), pp. 268, 286;Google ScholarCollins, , European Community Law (4th ed. 1990), pp. 130–134 and Slynn, (1984) 33 I.C.L.Q. 408, 413–418.Google Scholar

⁷⁰ [1991JS.T.C. 271.

⁷¹ [1985] 3 CM.L.R. 667.

⁷² Vincent Consultants Ltd. v. Commissioners of Customs and Excise 11988] V.A.T.T.R. 152.

⁷³ [1991] S.T.C. 575. The principle of equal treatment with regard to remuneration would be rendered ineffective if it could be undermined by discriminatory national provisions on income tax; hence EC Reg. 1612/68, art. 7.

⁷⁴ Judgment of the court, [1991] S.T.C. 575 at 583, paras. 11-14.

⁷⁵ Case 300/90 Commission v. Belgium and Case 204/90 H.M. Bachman v. Belgian State; in each case the issue was whether a resident could obtain a deduction for insurance contributions paid to a non-Belgian insurance company. The Court held that the Belgian system assumed that the cost to the tax system in granting the initial deduction would be offset by the benefit of taxing the pension in due course. The payment of a pension by a non-Belgian company would not lead to that benefit to the Belgian system—;see Bull. EC 3/92, p. 4.

⁷⁶ Commission v. French Republic Case 270/83, [1986] 1 E.C.R. 273.

⁷⁷ R. v. H.M. Treasury and Inland Revenue Commissioners, ex pane Daily Mail and General Trust p.I.e. [1988] S.T.C. 787. The taxpayer wished to transfer its central management and control to the Netherlands. In that country it would be subject to tax on such gains as accrued subsequent to its migration. Under United Kingdom law as it stood at that time there was no deemed disposal on migration so the combination of the systems meant that the gains accruing for the period before the migration would be subject to tax in neither country. Thus the purpose was to avoid charge to United Kingdom tax on capital gains and, incidentally, Advance Corporation Tax. Under what was then the Income and Corporation Taxes Act 1970, s. 482, later the Income and Corporation Taxes Act 1988, s. 756, the taxpayer had to obtain Treasury consent to the move. That consent would be forthcoming only if the taxpayer sold some of its property before the move (and thus landed itself with the capital gains liability). The Court pointed out the wide variety of rules governing a change of connecting factor in the different Member States. Some required the complete winding up of the company; others, including the United Kingdom, allowed the move but subject to conditions. The court concluded that as there was neither an agreement between the states under article 220 nor any directive under article 54, the Treaty regarded these problems as not yet subject to the right of establishment. It followed that there was no automatic Treaty right on the part of the Daily Mail Trust to move its central management and control: p. 807, para. 23.

⁷⁸ [1991]S.T.C. 271.

⁷⁹ IRCv. Commerzbank AG [1990] S.T.C. 285.

⁸⁰ Under what is now the Income and Corporation Taxes Act 1988, s. 825.

⁸¹ [1991] S.T.C. 271 at 279-280.

⁸² That case clearly establishes that one must ignore the comparison in which the German national chooses to operate in the United Kingdom not through a branch but through a United Kingdom subsidiary. Had this been done of course the German entity in the United Kingdom would not have been entitled to any exemption from tax on the US income in the first place. But this is not relevant—freedom of establishment means that one must be free to choose whether to trade by branch or subsidiary.

⁸³ A point for which I am grateful to Professor Kurt Lipstein, my friend and colleague who has done so much for the teaching of European Community Law.

⁸⁴ Slaalssecrelaris van Financien v. Cooperative Vereniging Cooperatieve Aardappelenbewaarplaats GA, Case 154/80 [1981] 3 C.M.L.R. 337.

⁸⁶ See CILFITSrl v. Ministro delta Sanita, Case 283/81, [1983] 1 C.M.L.R . 472.

⁸⁷ Thus only last year we find the Court saying, “The terms are to be interpreted strictly since they constitute exceptions to the general principle that turnover tax is levied on all service supplied for consideration by a taxable person”. Stichting Uitvoering Financiele Acties v. Staatssecretaris van Financier! [1991] 2 C.M.L.R. 429. So in the Berkholz case [1985] 3 C.M.L.R. 667 the taxpayer argued that gaming machines came within an exemption as being a “supply of services other than those already referred to to meet the direct needs of seagoing vessels or their cargoes” (6th Directive, article 15 para. 8). The Court simply said that there was a difference between the needs of the sea-going vessels (i.e. services necessary for the operation of the ship) and machines to amuse the passengers and having “no intrinsic connection with the needs of navigation”: [1985] 3 C.M.L.R. 667 at 679 (para. 21).

⁸⁸ European Community Commission v. United Kingdom [1988] S.T.C. 251, [1990] S.T.C. 768 at 771.

⁸⁹ Skatteminsteriet v. Henriksen [1990] S.T.C. 768 at 778, para. 12.

⁹⁰ Hong Kong Trade Development Council [1983] 1 C.M.L.R . 73 .

⁹¹ Van Dijk' Boekhuis [1986) 2 C.M.L.R. 575, distinguishing the creation of a new article from the thorough repair of an old. A new article is produced when the work of the contractor resultsin an article whose function, according to generally accepted views, is different from that of the materials provided. It is for the national court, having regard to the use which may be made of the articles, to decide whether or not a new article had been produced. Repairs, however radical, which simply restore to the article handed over the function which it had previously without resulting in the creation of a new article do not amount to the production of goods from customers' materials. Reading this case one thinks of cases under the Sale of Goods Act on the distinction between a sale of goods and a supply of services (see Atiyah, Sale of Goods8th. ed. (1990), pp. 20-27) and the Roman law doctrine of specificatio, neither of which was cited.

⁹² Trans Tirreno Express SpA v. Provincial VAT Office Sassari [1986] 2 C.M.L.R. 326. The plaintiff was a shipping company running a ferry service from Sardinia to Livorno—from one part of Italy to another but crossing international waters on the way. The court had no hesitation in saying that Italy had the right to charge VAT even for that part of the voyage outside its territorial waters. The taxpayer's argument for a strict literal interpretation was rejected.

⁹³ What does one make of the statement that “It is also apparent from its context and from its objectives that the 6th directive precludes the levying of VAT on drugs imported illegally into the Community” (Einberger [ 1985] 1 C.M.L.R. 765 at 775, para. 132)?

⁹⁴ Berkholz v. Finanzamt Hamburg-Milte-Allstadt [1985] 3 C.M.L.R. 667.

⁹⁵ The ship went from Germany to Denmark via the open seas; the German Inspector assessed German shipowners to tax on the whole of the profits arising from the machines (even while in Danish waters); their Danish counterparts did the same for Danish ships.

⁹⁶ The article did not limit the power of states to tax their own ships while outside their territorial waters.

⁹⁷ [1988] V.A.T.T.R. 152.

⁹⁸ Value Added Tax Act 1983, s. 8(4).

⁹⁹ See Avery Jones [1989] B.T.R. 671.

¹⁰⁰ The tribunal took “some comfort” from another VAT Tribunal decision called Binder Hamtyn (1983) V.A.T.T.R. 171. That case had been decided before Berkholz and had been denounced by one leading professional commentator as "manifestly wrong" in the light of the later Berkholz decision: Hoskins, Community Law and United Kingdom VAT(1988), p. 218.

^100a Vaines (1992) 142 New Law Journal 94.

¹⁰¹ [1991] S.T.C. 433 (C.A.) reversing [1990] S.T.C. 475 (Ch.D.).

¹⁰² A.C. 896, [1979] S.T.C. 793.

¹⁰³ [1982] A.C. 300, [1981] S.T.C. 174.