In the first case, the court found that the former Austrian income tax system for dividends was in breach of the EC Treaty’s free movement of capital right, as it taxed cross-border dividends at full 100% progressive rates whereas domestic dividends were taxed at a flat 25% rate or a maximum progressive rate of 50%.
In the second case the Luxembourg tax system was also found to discriminate against the Treaty’s free movement of capital provisions regarding its differing taxation rules for deductions on domestic and foreign dividends.
Gordon Brown has been a strong opponent of tax harmonisation, saying he would work to ensure Britain maintained its fiscal independence.
Peter Cussons, international corporate tax partner, PricewaterhouseCoopers, said, speaking of the two decisions:
‘Clearly these are welcome decisions for the claimants and they set a precedent for future similar cross-border tax cases.’
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