Mutual Recognition versus Transnational Administration in Tax Law: Is Fiscal Sovereignty Still Alive?

Abstract

This paper analyses the evolution of the concept of mutual recognition in tax matters. For many decades, the prevailing idea was that a state's fiscal sovereignty prevented the recognition of a foreign tax decision. Now, however, the situation is changing, especially following the economic crisis of 2008 and the proliferation of international tax avoidance phenomena fed by multinational enterprises. As a consequence of these recent developments, tax decisions have often become the result of the contribution of several national authorities (sometimes also supported by supranational bodies). Mutual recognition has thus become basically useless. One can therefore speak about a new notion of tax sovereignty, according to which the peculiarities of a single legal system are not protected either through mutual closure or mutual recognition, but via ex ante procedural cooperation.