ECJ says authorities must reveal tax affairs before deals

A tax dispute between two German crematorium operators looks set to establish
a legal precedent that local authority services cannot keep their tax affairs
secret where they are in competition with private companies.

The European Court of Justice (ECJ) has ruled that when a business – in this
case, Halle crematorium Feuerbestattungsverein Halle – wants to prevent a
council-owned competitor from enjoying tax breaks, it is entitled to information
on whether these actually exist.

Furthermore, it can then rely on Article 4(5) of the European Union’s (EU)
sixth VAT directive, which says that public authorities ‘shall be considered
taxable persons’, where a tax exemption ‘would lead to significant distortions
of competition’.

The case was brought by the private crematorium, which wanted to prove
suspicions that the town of Lutherstadt Eisleben paid no VAT regarding its
crematorium services, which the ECJ heard ‘would enable that local authority to
offer cremation services at prices lower than those which Feuerbestattungsverein
itself charges’.

The ECJ backed the private service, ruling: ‘A private person… in competition
with a body governed by public law and alleges that that body is… treated as a
non-taxable person for VAT or under-taxed (can) rely… on the sixth (VAT)
directive in legal proceedings’, allowing it to access tax records, and legally
challenge an exemption.

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