VAT and the EC Internal Market: The Shortcomings of Harmonisation

From the outset, turnover taxes have played a fundamental role in the European integration process. Harmonisation of these taxes was perceived an integral part of achieving a common market, and for this reason it was given priority. Over forty years since the introduction of a common VAT system, VAT is usually regarded as a broadly harmonised tax. Paradoxically, however, it is precisely this high level of harmonisation which seems to have allowed the preservation of some aspects of VAT law which constitute an obstacle to the establishment of the EC internal market. The aim of this paper is to highlight the shortcomings of harmonisation within the VAT area, and namely how harmonisation has prevented the European Court of Justice (ECJ) from applying the EC Treaty provisions to the field of VAT, resulting in the maintenance of laws which could arguably be regarded as contrary to the EC internal market and as restrictions to the fundamental freedoms.