Personal and family tax benefits in the EU internal market: from Schumacker to fractional tax treatment

Abstract

Applying EU rules of market integration and fundamental freedoms, the ECJ’s Schumacker doctrine states that the taxpayer’s personal and family circumstances must be taken into account in the internal market. In EU cross-border situations, taking into account of personal and family circumstances has been denied in many cases by Member States. This article argues that the ECJ’s Schumacker doctrine contains a number of inconsistencies and incorrect assumptions, and concludes that EU law need not follow this doctrine, but rather should evolve in a different direction. By critical assessment and evaluation of the complex and refined Schumacker doctrine over the last years (e.g. the recent Case C-283/15, X), possible tools to reshape the consideration of taxpayers’ personal and family circumstances can be devised. As an alternative to the jurisprudential Schumacker doctrine, a system of proportional distribution of personal and family tax benefits (i.e. “fractional tax treatment”) over the residence and working State(s) should be implemented.