Volume 47 (2019) / Issue 3
The right to deduct input VAT is recognized in the VAT Directive as well as in the corresponding jurisprudence of the ECJ as a fundamental component of the EU VAT system. It ensures the neutrality of taxation in the common system of VAT and, through that, equal treatment and undistorted competition in the single market. The exercise of the right of deduction may, however, undermine the efficient operation of national and, with that, the EU system of turnover taxation. The Member States may be prevented from collecting the revenues due in their national territory or addressing fraud and other abusive conduct that threaten the interests of national and EU public finances. In response to these challenges, ECJ case law has made considerable efforts to give effect to both the market integration and the tax efficiency objectives of the common system of VAT and reconcile the relevant legal rules. Developments in recent judgments seem to ensure that the concerns of Member States which face severe problems with the efficiency of VAT as a result of widespread practices of fraud may also be taken on board.
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