Schumacker is one of the most important cases in EU tax law. It opened the door to many more legal proceedings before the CJEU that tested the limits the Member States’ tax sovereignty against the force of EU law.
Tax sovereignty is a politically very sensitive issue in European politics. Nonetheless, looking at the 2018 Commission report monitoring the application of EU law, there were 100 (of 1571) infringement cases open within the taxation and customs policy area at the end of 2018. Evidently, national tax laws are not immune to EU law. The Schumacker (Case C-279/93) ruling of the Court of Justice of the European Union (CJEU) made exactly that point. The CJEU stated in para. 12 that “Although, as [EU law] stands at present, direct taxation does not as such fall within the purview of the Community, the powers retained by the Member States must nevertheless be exercised consistently with [EU law].” This core mantra of EU tax law has been repeated in almost every CJEU ruling dealing with the compatibility of national taxation rules with EU law. It was a shocker to many tax specialists at the time, who (wrongly) expected that tax sovereignty would trump EU law.
The legal issue in Schumacker is relatively straightforward. The Schumackers lived in Belgium, whilst Mr. Schumacker earned the sole household income in Germany. Germany refused to treat the Schumackers as a married couple for German tax purposes because, in short, they did not live in Germany. The German taxes on Mr. Schumacker’s wages were higher because he was not entitled to tax benefits attached to marital status. A fun fact is that the lawyer who represented the Schumackers was based in Aachen, Germany, not too far from Maastricht.
Using a legal formula (paras. 31-38 of the ruling) that has caused severe headaches to tax legislators, judges, and practitioners since then, the CJEU held that this difference in treatment potentially amounted to indirect discrimination on the basis of nationality in EU law. Since non-nationals usually live in other EU Member States, reserving favourable (tax) treatment exclusively to residents indirectly amounts to discrimination of non-nationals in EU law.
Schumacker is one of the most important cases in EU tax law. It opened the door to many more legal proceedings before the CJEU that tested the limits the Member States’ tax sovereignty against the force of EU law. Actually, Derlén and Lindholm have shown there are very few other cases that are more important in the entire body of CJEU case law. Consequently, any law student in Maastricht should know the case and, therefore, it is right to name a room of the law faculty in honour of Schumacker.
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