This article examines how the case law of the Court of Justice of the European Union (CJEU) interacts with that of the European Court of Human Rights (ECtHR) in the context of anti-fraud measures in VAT. The CJEU has consistently reinforced anti-fraud measures by permitting the rejection of VAT rights, such as exemption, deduction and refund, when it is evident that taxable individuals knew or should have known that they were engaging in VAT fraud. Meanwhile, recent ECtHR case law has introduced an important fundamental rights perspective, clarifying the limits imposed by the European Convention on Human Rights on the cumulative financial burden arising from such measures.
In particular, the article analyses the ECtHR’s decisions in Italmoda, Mariano Previti and Others v. the Netherlands, and Florio and Bassignana v. Italy. While the ECtHR confirms that the denial of VAT rights does not in itself constitute a criminal sanction under Article 7 ECHR, it also requires that the overall financial impact of anti-fraud measures remain proportionate and do not exceed the actual loss suffered by the state.
The article concludes that the interaction between CJEU and ECtHR case law reveals a structural tension within the EU system of VAT fraud enforcement. Although the effectiveness of anti-fraud mechanisms is a key goal of EU law, their cumulative and cross-border effects must be compatible with proportionality requirements and the protection of fundamental rights.
EC Tax Review