Cross-border loss compensation - the ECJ's decision in Marks & Spencer and how it was misinterpreted in the Netherlands

During the period that Marks & Spencer was pending before the European Court of Justice, the Netherlands State Secretary announced his intention to facilitate cross-border fiscal unities in the context of the proposal for a revised Corporate Income Tax Act in the Netherlands in 2007. After Marks & Spencer was decided, however, the State Secretary announced that he will not continue with the introduction of the facility because, in his opinion, cross-border loss compensation cannot be enforced on the basis of EC law. This article first discusses the Advocate-General's opinion and the ECJ's decision in Marks & Spencer and examines Dutch tax law because the Dutch system differs from UK tax law in essential respects. The article then discusses the Dutch provisions on cross-border consolidation and explains how the State Secretary misinterpreted the ECJ's decision and the consequences for the Dutch budgetary position. The article also looks for a solution to the problems raised by this decision.