University essay from Lunds universitet/Institutionen för handelsrätt

Abstract: European Union law recognizes the right to reinstitution as inherent in Community law. The foremost importance of this right makes sense among other reasons because it brings to life EU law and deters Member States from contravening it. However, EU law also allows Member States to deny refunds of taxes it illegally collected by arguing that the claimant taxpayer passed on the tax to the end consumers and would be unjustly enriched if he got a full refund. There is clearly plenty of room for restitution and this sort of unjust enrichment passing on defence to clash with each other. In this light, this essay asks whether the EU stand on the unjust enrichment passing on defence as permitted under EU law is sound. This essay holds that ideally the EU should close the door on the passing on defence on the basis of unjust enrichment. The passing on of taxes may not lead to unjust enrichment at all. Even if it did, the difficulty and cost of proving it are unsurpassable. This creates an unnecessary risk for Member States of denying restitution which would render EU law ineffective. Further, this defence rids the system of deterrence mechanism critical to a Union still in its forming stages. Furthermore, the legal and practical hurdles to a large number of consumers to file claim means that by large it is the State that is likely to enrich at the expense of the taxpayers. It is abuse of the State power to use the unjust enrichment doctrine to enrich itself.

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