Termination of the European Court of Justice's optimization scheme

Where taxable persons purchase goods for the purposes of both carrying out taxable transactions and using them for private purposes, according to the ECJ, related input tax is not partly deductible under the rules applicable to goods used for the purposes of carrying out both taxable and exempt transactions. Instead, the taxable person may, inter alia, allocate the mixed-used goods to his business assets enabling him to initially deduct the entire amount of purchase VAT. In this article, the author examines the financial advantages of the ECJ's doctrine of "allocation of goods" and the attempts of the Member States to circumvent that doctrine. It appears that only new legal measures are capable of terminating the ECJ's optimization scheme, not the Member States' interpretation of the existing legal rules.