This lesson provides a detailed comparative analysis of the sources of tax law in the USA and key European jurisdictions. It highlights the historical and structural differences between the US and European systems and explains how these have led to a convergence of legal practices.

• USA (Common Law System with Civil Law-like Statutes): The US income tax system is dominated by the Internal Revenue Code (IRC), a detailed and precise statute. The legislative drafting style has become increasingly complex and specific over time, limiting the courts’ interpretive role and pushing the system towards a more civil law-like model. Courts are now more reserved in their interpretation, meaning that ambiguity in application generally works in the taxpayer’s favor.

• Europe (Civil Law System with Common Law-like Trends): Historically, civil law jurisdictions were characterized by codified, comprehensive tax laws with an expectation of certainty and precision. However, European tax systems have become more common law-like in several ways:

  • Constitutional Courts: These courts have assumed an increasingly important role, not just in determining constitutional validity, but also in instructing the legislature on specific modifications to render laws constitutional, acting in a quasi-common-law fashion.

  • EU Institutions: The European Commission and the Court of Justice of the European Union (CJEU) have taken on a significant role in shaping tax law across the EU. The CJEU acts as a common law-type court, interpreting EU law and limiting legislative flexibility where national tax measures may conflict with EU treaties.

• Convergence and Borrowing: The two systems are increasingly borrowing from each other. The US has turned to a civil law model of statutory precision, while European jurisdictions are adopting common law tools like GAARs to combat tax avoidance. This hybridity is essential for the success of international tax initiatives.