Fundamental freedom upheld

The restriction on free movement of capital was the subject of a recent case in the European Court of Justice. A Belgian royal decree authorising the contracting on the Eurobond market of a public loan with banks in Germany stipulated that withholding tax on interest payable on the loan be waived and that Belgian residents were not to be permitted to subscribe. The European Community Commission said that by preventing its residents from subscribing Belgium was failing to fulfil its obligations under Article 73b of the European Community Treaty.
The Belgian Government agreed that its action did inhibit the free movement of capital but it claimed that prohibition was justified under Article 73d(1). It argued that while exemption from withholding tax was an essential for raising funds on the Eurobond market it should not be allowed to become a means of tax evasion....