On 31 May 2012, EC Tax Review organized a seminar on 'Fiscal Autonomy in a Changing EU' as a pre-event to the 2012 EATLP Congress in Rotterdam, the Netherlands. This note summarizes the proceedings of the conference.

As in the European Union the activities of public sector bodies are not subject to full taxation, the Value Added Tax (VAT) regime may cause distortions in their decision-making, in particular with respect to the choice between self-supply and contracting out of services to the private sector. Several European countries have addressed this distortion via a budgetary solution. In the Netherlands, such a refund scheme was introduced in 2003. This article provides an integral analysis of this scheme based on a broad range of evaluations. As this study shows, VAT only plays a minor role in considering whether to outsource and the introduction did not cause a significant increase in contracting out. Motives other than the budgetary effects might be more relevant. Besides, contracting out was already a trend, regardless of the costs of VAT. The introduction had a number of negative side effects, such as the administrative burden and the budgetary effects, leading to a rather negative opinion of the participating public sector bodies. Therefore, an introduction of compensation schemes in other Member States or a change in EU-VAT law as discussed in a recent Green Paper of the European Commission should be assessed thoroughly, to decide whether the remedy is worse than the disease.

On 29 November 2011, the European Court of Justice (ECJ) issued its ruling in the National Grid Indus case regarding the compatibility of exit taxes and the freedom of establishment. In this ruling, the ECJ ruled that levying an exit tax as such is not an infringement on the freedom of establishment, but it is not proportional to collect the exit tax immediately. Upon request of the taxpayer, collection has to be deferred until the built-in gains in the assets/liabilities are realized. Although the decision leaves some questions unanswered, the principal issue regarding the compatibility of exit taxes with European Union (EU) law is now resolved. In the past, the European Commission had started infringement cases regarding exit taxation against Member States whose exit tax legislation allegedly was not in line with EU law. Now that the ECJ has ruled in the National Grid Indus case, those Member States should start to amend their legislation to bring it in line with the requirements set out by the ECJ.

The Neumark report draws attention on several occasions to taxes that affect citizens, including income tax, wealth tax, inheritance tax and taxes on motor vehicles, while also making a number of recommendations. However, the subject of citizens and taxation attracted little attention in the first fifty years of the EU, with the primary focus of cooperation being on economic matters. A Savings Tax Directive was adopted, and there has also been quite some ECJ case law on specific national schemes' compliance, or otherwise, with EU law. The Treaty of Maastricht widened European cooperation to include the second and third pillars, and also of course monetary cooperation. Another relevant development was the introduction of Citizenship of the Union. Since the Treaty of Lisbon came into force on 1 December 2009, Brussels has been devoting increasing attention to the citizens of Europe, including in the field of taxation. Tax obstacles for citizens in cross-border situations now need to be identified and resolved so that European citizens, too, can enjoy the full benefits of the single market.

A movement of relocation, or rather a geographical dispersion of people and assets, is increasingly appearing within the European borders, as well as beyond them. Recent studies have shown that many legal and practical obstacles deter European Union (EU) citizens from actually exercising their freedom to move across borders within the EU. Especially, several indicators prove that some difficulties still remain in the practice of inheritance in cross-border situations. In respect of taxation, the problems consist mainly of double taxation and discriminatory tax treatment. These last ten years, the legislation of the Member States has progressively complied with EU law requirements and the difference of treatment between residents and non-residents is beginning to disappear completely. Today, the most important obstacles to the free movement of European citizens are due to the risk of double taxation of inheritances by several Member States. In this respect, the Court of Justice is powerless since its power of interpretation does not allow it to arbitrate between the Member States' taxation powers. Aware of this problem, the European Commission has recently adopted a set of measures destined to improve the coordination between the states legislations in order to fight the double taxation on inheritances.

the European Commission published its 'Green Paper on the future of value added tax (VAT)' with the challenging subtitle 'Towards a simpler, more robust and efficient VAT system'. 1 In this Green Paper, the Commission launches a process to review the present transitional VAT regime that came into force on 1 January 1993 -a transitional regime never intended to be in place beyond the twentieth century, as Algirdas emeta, Commissioner for Taxation, Customs, Audit and Anti-fraud, wrote in his editorial in EC Tax Review 2011/1. As a kick-off, the Commission invited all stakeholders to express their problems with the present VAT regime and to indicate preferred solutions. The deadline for response was 31 May 2011, and the Commission has announced to present, by the end of 2011, a Communication in which priority areas for further actions will be identified. 2 The VAT, nowadays taking more than 21% of the national tax revenues of EU, has become one of the major sources of revenue for national budgets and, in many EU Member States, is the main revenue raiser. Since the 1990s, the tax structures of many Member States have shifted from less robust income-based direct tax revenues to more robust consumption-based indirect tax revenues. This shift in the tax mix can be rationalized by striving at reducing the negative effect of taxation on growth and employment and achieving less dependency on taxes on labour and capital income in ageing societies. An even more robust and prominent role for the VAT, however, requires more attention to the problems of the current VAT system. Changing business models, increasing cross-border services, on-going technological development and complex VAT fraud are challenges to make the VAT simpler, more efficient, less costly for business and tax authorities, and less sensitive to fraud. The Commission is of the opinion that the piecemeal approach of step-by-step improvements of the system is not sustainable, and a fundamental overhaul of the VAT regime will be needed. The Green Paper goes into the principles of taxation of intra-EU transactions and addresses issues that need attention, irrespective of any choice to be made on the treatment of intra-EU transactions. In this editorial, I would like to make some remarks on the questions raised by the Commission.

In this article, the application of the Parent-Subsidiary Directive in respect of hybrid entities is analysed by Prof. Ton Stevens and Dr Gijs Fibbe. A distinction is made between outbound and inbound situations. In outbound situations, Member States can differ of opinion on which is the profit-generating entity: the parent company or its hybrid subsidiary. In inbound situations, where a dividend is paid to a hybrid entity, Member States can differ of opinion about the question to whom the dividend is paid: the hybrid entity or its participants. The authors describe the explicit solution in outbound situations included in Article 4, paragraph 1a, of the Parent-Subsidiary Directive. For inbound situations, such explicit provision addressing hybrid entities is missing. The authors describe how according to them the Parent-Subsidiary Directive should be applied in respect of hybrid entities in inbound situations. After a thorough analysis, they describe why in their view Member States are, for purposes of the Parent-Subsidiary Directive, no longer autonomous in the tax classification and income allocation in respect of hybrid entities established in other Member States in inbound situations.

The essay introduces the main dilemmas faced by decision makers in the European Union (EU) regarding the initiation of a Common Corporate Tax Base (CCTB) in the EU. It introduces the policy considerations and conflict of interests among EU Members, which prevented the initiation of a CCTB in the EU by now; the possible variations of CCTB, including their advantages and disadvantages; and the possibility of effectuating the enhanced cooperation procedure to initiate a CCTB among part of EU Members. The essay then analyses the possible implications of such a step on the participating and non-participating EU Members, on the EU as a whole, and on third countries. To that extent, the essay attempts to draw a lesson from other 'Europe in two speed' practices: the Economic and Monetary Union (EMU), the Schengen agreements, and the security policy. The main findings are that a CCTB will not necessarily provide only for benefits of the Members involved in it and that the formula adopted for such an arrangement may be decisive to its short-term and long-term consequences. It should therefore be carefully weighed.