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VAT Applicability to Employee Retail Vouchers

While the European Court of Justice issues many important rulings with respect to competition, transportation, free movement of capital, and other policies, its contributions to tax policy sometimes get overlooked. Too many view taxation as just an issue of national import. However, the European Court of Justice has made some extraordinarily important contributions in the area of taxation. The recently discussed case of Astra Zeneca UK LTD v. HMRC (C-40/09, ) proves this notion. The following discusses the facts, governing guidance, issues, resolutions, drawbacks, and future applications. On appeal from the VAT and Duties Tribunal of Manchester, United Kingdom, this case addresses whether UK tax law with regard to value-added taxes (VATs) is correct. The judgment considers whether VAT applies to fringe benefits beyond cash (retail vouchers) from an employer to an employee. For global context here, the US tax system’s treatment of fringe benefits can be considered. In the United States then, there is no VAT. However, for income tax purposes, fringe benefits result in the best possible treatment. As the employers deduct the fringe benefits provided, the employees exclude the fringe benefits from their gross income.