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State Aid and Tax Rulings: Managing the Risk of Recovery

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Abstract

Despite the undeniable advantages in terms of legal certainty and compliance, tax rulings may facilitate harmful tax competition. The Commission has been investigating on rulings granting a selective advantage to specific economic operators from the perspective of State aid rules. The aids’ recovery that may follow is undermining that same legal certainty that tax authorities attempt to achieve through the issuance of rulings. While it is the State that has failed to comply with the procedure laid down in Art. 108 TFEU, the financial burden of the recovery is entirely borne by the companies. Building on the analysis of the Union Courts’ case law and of the Commission decisions, this contribution attempts to identify the recommended measures and policies to minimize the risk of recovery.

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Notes

  1. 1.

    The European Union currently lacks general competence to regulate the area of taxation and has no tax system. The Council must unanimously agree on tax proposals, under the special legislative procedure set forth in Art. 113 and 115 TFEU, which results in the possibility of national veto. The European Commission has recently proposed to move to qualified majority voting in EU tax policy (COM [2019] 8 final). See Tesauro, F. (2017). Istituzioni di diritto tributario. Parte generale. Milano: UTET, 82; Remeur, C. (2015). Tax Policy in the EU: Issues and Challenge. European Parliament Research Service, 1. Available at http://www.europarl.europa.eu/RegData/etudes/IDAN/2015/549001/EPRS_IDA(2015)549001_EN.pdf. Since 1974, the Court of Justice of the European Union (CJEU) has clarified that the Commission’s competence in the field of State aid control also covers the area of direct business taxation. ECJ, 2 July 1974, C-173/73, Italy v. Commission, para. 13: “The aim of Art. 92 is to prevent trade between Member States from being affected by benefits granted by the public authorities which, in various forms, distort or threaten competition by favoring certain undertakings or the production of certain goods. Accordingly, article 92 does not distinguish between the measures of State intervention concerned by reference to their causes or aims but defines them in relation to their effects. Consequently, the alleged fiscal nature or social aim of the measure in issue cannot suffice to shield it from the application of Article 92”.

  2. 2.

    In order to enhance the cooperation between the Member States and the Commission, the latter has recently adopted the Code of Best Practices for the conduct of State aid control procedures (C [2018] 4412 final). Available at http://ec.europa.eu/competition/state_aid/reform/best_practise/en.pdf.

  3. 3.

    ECOFIN, Code of Conduct for Business Taxation, para. (J). Available at https://eur-lex.europa.eu/resource.html?uri=cellar:d2cdddef-e467-42d1-98c2-31b70e99641a.0008.02/DOC_2&format=PDF. See Monti, M. (1999). How State Aid Affects Tax Competition. EC Tax Review, 4, 209.

  4. 4.

    Commission notice on the application of the State aid rules to measures relating to direct business taxation (98/C 384/03) (1998) [hereinafter 1998 Commission Notice]. Available at https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:1998:384:0003:0009:EN:PDF.

  5. 5.

    Ivi., paras. 21–22.

  6. 6.

    Art. 16 Regulation No. 2015/1589. The Treaties do not explicitly establish the obligation of recovery: instead, it has been inferred by the Union Courts’ case law from Art. 108 TFEU (ex Art. 88 TEC) and later incorporated in the EU secondary law. See the first case, ex multis, ECJ, 12 July 1973, Commission v. Germany, C-70/72, para. 13. See also Commission Notice 2007/C 272/05 Towards an effective implementation of Commission decisions ordering Member States to recover unlawful and incompatible State aid, paras. 9-10 [hereinafter Recovery Notice]. Available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52007XC1115(01)&from=EN; Moreno González, S. (2017). Tax rulings: intercambio de información y ayudas de Estado en el contexto post-BEPS. Valencia: Tirant lo Blanch, 250.

  7. 7.

    Art. 108(2) TFEU. A case of this kind was brought before the Court as Ireland had failed to recover the State aid granted to Apple within four months following the notification of the decision (action brought on 5 December 2017, Commission v. Ireland, C-678/17): the case has been discontinued due to Ireland taking the measures necessary to comply with the obligations arising from the Commission’s decision of recovery.

  8. 8.

    Pursuant to Art. 278 TFEU, actions brought before the CJEU do not have suspensory effect. With regard to the obligation of recovery, the recovered amount can be placed in an escrow account, pending the outcome of the EU court procedures. The Court may, however, if it considers that circumstances so require, order to suspend the application of the contested act (Art. 278 TFEU).

  9. 9.

    In June 2013, the Commission set up the Tax Planning Practices task force to follow up on public allegations of favorable tax treatment of certain companies voiced in the media and in national Parliaments. Since then, the task force has been reviewing the tax ruling practices of Member States from the perspective of State aid rules, identifying those not reflecting in a reliable manner what would result from the application of the ordinary tax rules. See State Aid Register. Available at http://ec.europa.eu/competition/state_aid/tax_rulings/index_en.html.

  10. 10.

    De Broe, L. (2015). The State Aid Review against Aggressive Tax Planning: ‘Always Look a Gift Horse in the Mouth’. EC Tax Review, 6, 291; DG Competition, Working Paper on State Aid and Tax Rulings, Internal Working Paper—Background to the High Level Forum on State Aid of 3 June 2016, para. 5 [hereinafter DG-Comp Working Paper]. Available at http://ec.europa.eu/competition/state_aid/legislation/working_paper_tax_rulings.pdf.

  11. 11.

    OECD, Advance Ruling, Glossary of Tax Terms. Available at http://www.oecd.org/ctp/glossaryoftaxterms.htm. See also Romano, C. (2002). Advance Tax Rulings and Principles of Law Towards a European Tax Rulings System? Amsterdam: IBFD, 78; Rogers-Glabush, J. (Ed.) (2015). International Tax Glossary. Amsterdam: IBFD, 11.

  12. 12.

    Romano, C. (2001). Private Rulings Systems in EU Member States. A Comparative Survey. European Taxation, 1, 30. See also Lang, M. (2015). Tax Rulings and State Aid Law. British Tax Review, 3, 395; Van Eijsden, A. Killmann, B. Meussen, G. T. K. (2010). General Part. In M. Lang, P. Pistone, J. Schuch, & C. Staringer, (Eds.), Procedural Rules in Tax Law in the Context of European Union and Domestic Law. Alphen aan den Rijn: Kluwer Law International, 12.

  13. 13.

    To borrow Walton J.’s eloquent expression in Vestey v. Inland Revenue Commissioners [1979] Ch. 177, 197. The judgment addresses the legal basis in the British tax system of the extra-statutory concessions, a practice that allowed the Inland Revenue to give taxpayers a reduction in tax liability to which they would not be entitled under the strict letter of the law. See Daly, S. (2017). The Life and Times of ESCs: A Defence? In P. Harris & D. De Cogan (Eds.), Studies in the History of Tax Law: Volume 8 (pp. 169–194). Oxford: Hart Publishing.

  14. 14.

    See De Broe, L., supra note 10, 291; DG-Comp Working Paper, supra note 10, para. 5; and Givati, Y. (2009). Resolving Legal Uncertainty: The Unfulfilled Promise of Advance Tax Rulings. Virginia Tax Review, 29, 137.

  15. 15.

    See Romano, C., supra note 12, 22.

  16. 16.

    Explanatory report on Legislative Decree No. 156/2015, 1. Available at http://www.governo.it/sites/governo.it/files/79296-10390.pdf. See McKee, M., Siladke, C. A., & Vossler, C.A. (2018). Behavioral Dynamics of Tax Compliance When Taxpayer Assistance Services Are Available. International Tax and Public Finance, 3, 722.

  17. 17.

    DG-Comp Working Paper, supra note 10, para. 5; Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU (2016), para. 174 [hereinafter 2016 Commission Notice]. Available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52016XC0719(05)&from=EN.

  18. 18.

    However, in literature it has reasonably been argued that determining whether a tax ruling “merely interprets” or “deviates from” the normal application of a tax provision can be complicated in practice, especially considering the fact that rulings are used to provide certainty where the “normal application” of the law is not obvious. See De Broe, L., supra note 10, 291; Avi-Yonah, R. S., & Mazzoni, G. (2016). Apple State Aid Ruling: A Wrong Way to Enforce the Benefits Principle? University of Michigan Law & Economics Research Paper Series, Research Paper No. 16-024, 6. Available at SSRN: https://ssrn.com/abstract=2859996.

  19. 19.

    2016 Commission Notice, supra note 17, para. 174.

  20. 20.

    Ibid.

  21. 21.

    http://ec.europa.eu/competition/state_aid/tax_rulings/index_en.html.

  22. 22.

    The EGC annulled the Commission decision which qualified the Belgian «excess profit» regime as State aid, stating that the Commission did not satisfy its burden to prove that the measure constituted a scheme. EGC, 14 February 2019, Kingdom of Belgium v. Commission, T-131/16.

  23. 23.

    Commission, press release No. IP/17/5343. Available at http://europa.eu/rapid/press-release_IP-17-5343_en.htm.

  24. 24.

    Commission Decision of 1 October 2014, Case SA.34914 UK Gibraltar corporate tax regime [hereinafter Alleged Aid by Gibraltar]. Available at http://ec.europa.eu/competition/state_aid/cases/250265/250265_1784365_398_2.pdf.

  25. 25.

    Commission Decision of 19 December 2019, Case SA.34914 UK Gibraltar corporate tax regime [hereinafter Aid by Gibraltar]. Available at http://ec.europa.eu/competition/state_aid/cases/250265/250265_2042846_607_2.pdf.

  26. 26.

    Commission, press release No. IP/18/5831. Available at http://europa.eu/rapid/press-release_IP-18-5831_en.htm.

  27. 27.

    DG-Comp Working Paper, supra note 10, para. 7.

  28. 28.

    Article 1(d) of Regulation No. 2015/1589. The case law of the Union Courts does not provide guidance on the interpretation of the definition of “aid scheme”. In the final decision on Belgium’s “excess profit scheme”, the Commission notes, however, that the Union Courts have in the past accepted the Commission’s qualification of tax measures sharing many characteristics with the contested schemes as aid schemes within the meaning of that provision. See Commission Decision of 11 January 2016, Case SA.37667 Excess profit tax ruling system in Belgium, para. 19. Available at http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_37667; ECJ, 22 June 2016, Belgium and Forum 187 ASBL v. Commission, joined cases C-182/03 and C-217/03; ECJ, 17 September 2009, Commission v. Koninklijke FrieslandCampina, C-519/07P. When targeting aid schemes, the Commission must preliminarily demonstrate that the contested set of measures falls within the scope of the aforementioned article 1(d) of Regulation No. 2015/1589. In particular, (i) the investigation must identify an act on the basis of which aid can be awarded, (ii) the act should not require any further implementing measures and (iii) should define the potential aid beneficiaries in a general and abstract manner.

  29. 29.

    See Tropea, A. (2018). I profili giuridici dell’adempimento collaborativo. Rivista trimestrale di diritto tributario, 3–4, 814; Szudoczky, R., & Majdanska, A. (2017). Designing Co-operative Compliance Programmes: Lessons from the EU State Aid Rules for Tax Administrations. British Tax Review, 2, 208; Bronżewska, K. (2016). Cooperative compliance: a new approach to managing taxpayer relations. Amsterdam: IBFD, 93; OECD, Co-operative Compliance: A Framework: From Enhanced Relationship to Co-operative Compliance, OECD, Paris (2013). Available at https://read.oecd-ilibrary.org/taxation/co-operative-compliance-a-framework_9789264200852-en; and Id., Study into the Role of Tax Intermediaries, OECD, Paris (2008).

  30. 30.

    Szudoczky, R., & Majdanska, A., supra note 29, 204.

  31. 31.

    OECD, Co-operative Compliance: A Framework: From Enhanced Relationship to Co-operative Compliance, supra note 29, 29.

  32. 32.

    Szudoczky, R., & Majdanska, A., supra note 29, 213. See also Bronżewska, K. (2016), supra note 29, 357, who addresses the risks related to the use of discretionary powers by the tax authorities within cooperative compliance programs.

  33. 33.

    Maitrot De La Motte, A. (2017). Tax Recovery of the Illegal Fiscal State Aids: Tax Less to Tax More. EC Tax Review, 2, 77, after dealing with the procedural and technical difficulties of fiscal aids’ recovery, seems to also question the constitutional grounds of the recovery in this field on the basis of the principle of “no taxation without representation”. This objection, though clear and appealing, can be overcome considering that the State aid framework is provided by the TFEU, that all Member States have agreed on, thus yielding a portion of sovereignty. Therefore, it is true that taxation is usually covered in modern democracies by the rule of law, but the Commission’s power to review all forms of aids, fiscal ones included, is fully compliant with it. As observed by Miladinovic, A., it is true that «Member States did not want to give up their sovereignty in direct tax matters […] nevertheless, the Member States need to respect EU principles and cannot use their tax sovereignty as an excuse to disregard the main rules, particularly the State aid prohibition». See Miladinovic, A. (2018). The State Aid Provisions of the TFEU in Tax Matters. In M. Lang, P. Pistone, J. Schuch, & C. Staringer (Eds.), Introduction to European Tax Law on Direct Taxation (pp. 109–110). Wien: Linde.

  34. 34.

    Forrester, E. (2018). Is the State Aid Regime a Suitable Instrument to Be Used in the Fight Against Harmful Tax Competition? EC Tax Review, 27, 33.

  35. 35.

    Maitrot De La Motte, A., supra note 33, 88, concludes that “at the end of the process, the offending State has been enriched and the ‘aided’ company has become poorer. It would be otherwise only if the Court of justice granted the possibility of incurring State responsibility”.

  36. 36.

    Action brought on 22 May 2018, Amazon EU and Amazon.com v. Commission, T-318/17, 7th and 8th plea in law; Action brought on 19 December 2016, Apple Sales International and Apple Operations Europe v. Commission, T-892/16, 11th plea in law; Action brought on 29 December 2015, Fiat Chrysler Europe v. Commission, T-759/15, 3rd and 4th plea in law. The Member States involved in the investigations are invoking the aforementioned principles as well. It may sound paradoxical the circumstance that they are opposing the Commission’s orders to recover—and keep—the back taxes with interests. However Fregni, M. C. (2017) (Mercato unico digitale e tassazione: misure attuali e progetti di riforma. Rivista di diritto finanziario e scienza delle finanze, LXXVI(1), I, 74) notes that, on the one side, the recovered amounts would not be available as viable resources before the electorate, because, according to the EU rules, they would be allocated to lower the government debt; on the other hand, the States fear to lose their attractiveness for cross-border investments (as those performed by the MNEs involved in the pending cases). See action brought on 30 December 2015, Luxembourg v. Commission, T-755/15, 3rd plea in law; action brought on 9 November 2016, Ireland v. Commission, T-778/16, 7th plea in law; action brought on 14 December 2017, Luxembourg v. Commission, T-816/17, 5th plea in law.

  37. 37.

    Ten years since the date, the aid was granted.

  38. 38.

    ECJ, 15 February 1996, C-63/93, Duff and others, para. 20. See also the EGC, 12 September 2007, T-348/03, Friesland Foods v. Commission, para. 125.

  39. 39.

    See, ex multis, ECJ, 11 March 1987, Van der Bergh en Jurgens BV v. Commission, C-265/85, para. 45; Id., 12 November 1987, Ferriere San Carlo s.p.a. v. Commission, C-344/85, para. 13; Id., 12 November 1987, Ferriere San Carlo s.p.a. v. Commission, C-344/85, para. 13; Id., 26 June 1990, Sofrimport v. Commission, C-152/88, para. 22; Id., 15 April 1997, Irish farmers Association and others v. Minister for Agricolture, Food and Forestry, Ireland y Attorney General, C-22/94, para. 17; Id., 14 September 1995, Lefebvre and others v. Commission, C-571/93, paras. 73–74; and Id., 14 October 2010, Nuova Agricast S.r.l. and Cofra S.r.l. v. Commission, C-67/09, para. 71.

  40. 40.

    Pastoriza, J. S. (2016). The Recovery Obligation and the Protection of Legitimate Expectations: The Spanish Experience. In I. Richelle, W. Schön, & E. Traversa (Eds.), State aid Law and Business Taxation. Berlin-Heidelberg: Springer, 254.

  41. 41.

    ECJ, 20 September 1990, Commission v. Federal Republic of Germany, C-5/89, para. 14; ECJ, 11 November 2004, Demesa e Territorio Històrico de Alava v. Commission, C-183/02 and C-187/02, para. 52; and EGC, 22 April 2016, France v. Commission, T-56/06 RENV II, para. 84.

  42. 42.

    1998 Commission Notice, supra note 4, paras. 21–22.

  43. 43.

    Code of Conduct Group, Guidance on the identification of harmful tax rulings, agreed on 22 November 2010, doc. 16766/10.

  44. 44.

    See Falsitta, G. (2010). Recupero retroattivo degli ‘aiuti di stato’ e limiti della tutela dei principi di capacità contributiva e di affidamento [nota a Corte cost., ord. n. 36/2009]. Rivista di diritto tributario, 11(II), 672. Contra, Forrester, E., supra note 34, 32; Giraud, A. (2008). A Study of the Notion of Legitimate Expectations in State AidRecovery Proceedings: “Abandon All Hope, Ye Who Enter Here”? Common Market Law Review, 45, 1426–1427.

  45. 45.

    ECJ, 29 April 2004, Commission v. Italy, C-91/01, paras. 66–67.

  46. 46.

    OECD, Arbitrage, Tax, Glossary of Tax Terms. Available at http://www.oecd.org/ctp/glossaryoftaxterms.htm. See also Avi-Yonah, R. S. (2007). Tax Competition, Tax Arbitrage and the International Tax Regime. Bulletin for International Taxation, 61(4), 137.

  47. 47.

    See Ismer, R., & Piotrwki, S. (2015). The Selectivity of Tax Measures: A Tale of Two Consistencies. Intertax, 43, 559.

  48. 48.

    However the Commission usually develops a subsidiary line of reasoning by examining the individual tax rulings against the aforementioned three-step selectivity test to demonstrate that it is also selective under that analysis.

  49. 49.

    Commission Decision of 4 October 2017, Case SA.38944 Aid to Amazon [hereinafter Aid to Amazon], rec. 249. Available at http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38944.

  50. 50.

    See Action brought on 22 May 2018, Amazon EU and Amazon.com v. Commission, T-318/17: “Eighth plea in law, alleging that the decision violates the principles of legal certainty, retroactivity, and non-discrimination, and an essential procedural requirement because it assesses the validity of the 2003 ATC by reference to post-dating OECD Guidelines. The decision retroactively and discriminatorily applies, and improperly holds the applicants and Luxembourg to, standards in the 2017 OECD Guidelines on transfer pricing first issued after the Commission opened the procedure under Article 108(2) TFEU, and long after the adoption of the 2003 ATC”. See also action brought on 14 December 2017, Luxembourg v. Commission, T-816/17, 5th plea in law: “the recovery of the aid is incompatible with the principle of legal certainty, taking into account the good faith of the Grand Duchy of Luxembourg in the application of transfer pricing and the fact that the new transfer pricing approach applied by the Commission in the contested decision could not have been foreseen”.

  51. 51.

    For an in-depth analysis on the application of the ALP by the Commission, see Mason, R. (2017). Tax Rulings as State Aid—Part 4: Whose Arm’s-Length Standard? Tax Notes, 155(7), Virginia Law and Economics Research Paper No. 2017-19. Available at https://ssrn.com/abstract=2990603; Wattel, P. J. (2016). Stateless Income, State Aid and the (Which?) Arm’s Length Principle. Intertax, 44, 791; and Boccaccio, M. (2017). L’evoluzione della politica della Commissione su aiuti di Stato e ruling fiscali. Rivista di diritto finanziario e scienza delle finanze, LXXVI(2), I, 224.

  52. 52.

    2016 Commission Notice, supra note 17, para. 173.

  53. 53.

    Commission Decision of 30 August 2016, Case SA.38373 Aid to Apple, rec. 255 [hereinafter Aid to Apple]. Available at http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38373.

  54. 54.

    2016 Commission Notice, supra note 17, para. 173; DG-Comp Working Paper, supra note 10, para. 18. See Thomson, A., & Hardwick, E. (2017). The European Commission’s Application of the State Aid Rules to Tax: Where Are We Now? Journal of Taxation of Investments, 45.

  55. 55.

    See ECJ, 22 June 2016, Belgium and Forum 187 ASBL v. Commission, joined cases C-182/03 and C-217/03, para. 95.

  56. 56.

    OECD (2010), Transfer Pricing Guidelines, para. B.2.3.

  57. 57.

    Commission Decision of 21 October 2015, Case SA.38375 Aid to Fiat, rec. 132. Available at http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38375.

  58. 58.

    Aid to Amazon, supra note 49, rec. 542.

  59. 59.

    Ivi, rec. 404–405.

  60. 60.

    Action for annulment brought on 29 December 2015, Fiat Chrysler Finance Europe v. Commission, T-759/15.

  61. 61.

    See Cachia, F. (2017). Analyzing the European Commission’s Final Decisions on Apple, Starbucks, Amazon and Fiat Finance & Trade. EC Tax Review, 1, 33; Ismer, R., & Piotrwki, S., supra note 47, 559.

  62. 62.

    Ibid.

  63. 63.

    Action for annulment brought on 9 November 2016, Ireland v. Commission, T-778/16, second plea in law: “The Commission also wrongly claims that the Opinions were selective. The Commission’s reference system wrongly ignores the distinction between resident and non-resident companies. The Commission attempts to re-write the Irish corporation tax rules so that, in respect of Opinions, the Revenue Commissioners should have applied the Commission’s version of the arm’s length principle (‘ALP’). This principle is not part of EU law or the relevant Irish law in relation to branch profit attribution, and the Commission’s claim is inconsistent with Member State sovereignty in the area of direct taxation”.

  64. 64.

    Avi-Yonah, R. S., supra note 46, 137; Lepard, B. D. (1999). Is the United States Obligated to Drive on the Right? A Multidisciplinary Inquiry Into the Normative Authority of Contemporary International Law Using the Arm’s Length Standard as a Case Study. Duke Journal of Comparative & International Law, 43, 57–58.

  65. 65.

    Cachia, F., supra note 61, 34; Vann, R. J. (1998). International Aspects of Income Tax. In V. Thurony (Ed.), Tax Law and Drafting (vol. 2, 718). The Hague: Kluwer Law International.

  66. 66.

    Ibid.

  67. 67.

    Commission Decision of 7 October 2014, Case SA.38944 Alleged Aid to Amazon, note 21, 8 [hereinafter Alleged Aid to Amazon]. Available at http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38944.

  68. 68.

    Aid to Amazon, supra note 49, rec. 155, note 119.

  69. 69.

    Commission, press release No. IP/16/2923. Available at http://europa.eu/rapid/press-release_IP-16-2923_en.htm.

  70. 70.

    Ibid.

  71. 71.

    Aid to Apple, supra note 53, rec. 51–52.

  72. 72.

    US Senate Subcommittee on Investigation, Offshore Profit Shifting & Apple, Memorandum (21 May 2013), 5. See also https://www.revenue.ie/en/companies-and-charities/corporation-tax-for-companies/corporation-tax/company-residency-rules.aspx; Furthermore, the Memorandum released by the Subcommittee offered recommendations to strengthen US transfer pricing rules and reform the so-called “check-the-box” and “look-through” loopholes that enable multinationals to shield offshore income from US taxes.

  73. 73.

    US Senate Subcommittee on Investigation, Activities Report of the Permanent Subcommittee on Investigations for the 113th Congress, Memorandum (December 2014).

  74. 74.

    Commission Decision of 11 June 2014, Case SA.38373 Alleged aid to Apple, rec. 58 [hereinafter Alleged aid to Apple]. Available at http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38373.

  75. 75.

    Ibid.

  76. 76.

    Ivi, rec. 59.

  77. 77.

    Aid to Apple, supra note 53, rec. 150: the «favourable position selectively granted to the two undertakings [is considered to be] based on the discretion of Irish Revenue which went beyond the simple management of tax revenue by reference to objective criteria».

  78. 78.

    ECJ, 4 June 2015, C-15/14, European Commission v. MOL Magyar Olaj-es Gazipiari Nyrt, para. 66.

  79. 79.

    ECJ, 18 July 2013, C-6/12, P Oy, para. 27.

  80. 80.

    ECJ, 4 June 2015, C-15/14, European Commission v. MOL Magyar Olaj-es Gazipiari Nyrt, para. 65.

  81. 81.

    ECJ, 18 July 2013, C-6/12, P Oy, para. 27.

  82. 82.

    Ivi, rec. 65.

  83. 83.

    Alleged aid to Amazon, supra note 67, rec. 76. Aid to Amazon, supra note 49, rec. 306 and 325.

  84. 84.

    Marian, O. (2017), The State Administration of International Tax Avoidance. Harvard Business Law Review, 7, 201; UC Irvine School of Law Research Paper No. 2015-95.

  85. 85.

    Ivi, 220.

  86. 86.

    Ivi, 217.

  87. 87.

    Alleged aid to Apple, supra note 74, rec. 58; Aid to Amazon, supra note 49, rec. 63.

  88. 88.

    Alleged aid to Apple, supra note  74, rec. 58.

  89. 89.

    Aid to Amazon, supra note 49, rec. 272.

  90. 90.

    This a case in point for tax risk, which can be defined as the chance of undergoing a tax assessment—in the form of a State aid investigation—combined with the subsequent amount of revenue losses. See Marino, G. (2018). La Corporate Tax Governance quale nuovo approccio culturale nei rapporti tra Fisco e contribuente, in Corporate Tax Governance. Milano: Egea editore, 4; Valente, P., (2017). Tax governance e tax risk management. Milanofiori-Assago: Wolters Kluwer, 91. In the cases at hand, due to the extensive media coverage, the tax risk involves a high risk to reputation as well that can result in the so-called “tax shaming” or even in boycotts. See Barford, V., & Holt, G., (2013, May 21). Google, Amazon, Starbucks: The rise of “tax shaming”. BBC News Magazine. Available at https://www.bbc.com/news/magazine-20560359.

  91. 91.

    The EU has been promoting a transparency policy, which requires national tax authorities to implement the automatic exchange of information on advance cross-border rulings and advance pricing arrangements. In particular, the Council adopted the Directives (EU) 2015/2376 and (EU) 2016/881 as regards mandatory automatic exchange of information in the field of taxation and country-by-country reporting. The first imposes to exchange information with a receiving administration, in respect of a cross-border ruling, within three months after its issuance (Art. 8a(5)(a) Directive (EU) 2015/2376). The latter extends the scope of the automatic exchange of information to the country-by-country reports, in which MNEs should provide annually and for each tax jurisdiction in which they do business the amount of revenue, profit before income tax and income tax paid and accrued. MNE groups should also report the number of their employees, stated capital, accumulated earnings and tangible assets in each tax jurisdiction. Finally, they should identify each entity within the group doing business in a particular tax jurisdiction and provide an indication of the business activities in which each entity engages. See OECD, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5—2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris (2015). Available at http://dx.doi.org/10.1787/9789264241190-en; Id., Transfer Pricing Documentation and Country-by-Country Reporting, Action 13—2015 Final Report, OECD, Paris (2015). Available at http://dx.doi.org/10.1787/9789264241480-en. See also Seer, D. R., & Wilms, A. L., (2016), Tax Transparency in the European Union Regarding Country by Country Reporting (BEPS Action 13). EC Tax Review, 5–6, 325; Joint transfer pricing forum, Statistics on APAs in the EU at the End of 2017, JTPF/007b/2018/EN, meeting of 24 October 2018. Available at https://ec.europa.eu/taxation_customs/sites/taxation/files/statistics_on_advance_pricing_agreements_2017_en.pdf.

  92. 92.

    Maitrot De La Motte, A., supra note 33, 88.

  93. 93.

    ECJ, 17 June 1999, Belgium v. Commission, C-75/97, para. 65.

  94. 94.

    Recovery Notice, supra note 6, para. 13.

  95. 95.

    Ivi, para. 3.

  96. 96.

    See Monti, M., supra note 3, 208. Marian, O., supra note 84, 203, defines this behavior, with specific reference to the course of action of the Luxembourgish tax administration, as “arbitrage manufacturing [,] a process in which, in return for a fee, a jurisdiction issues a regulatory instrument to a taxpayer who resides outside the jurisdiction, in respect of an investment located outside the jurisdiction. The regulatory instrument is designed to synthetically generate differences between the tax laws of the jurisdictions of source and residence. The taxpayer can then take advantage of the manufactured differences, and eliminate most of its tax liability on the profitable activity”, suggesting that, while current efforts to counter tax avoidance are aimed at curtailing aggressive taxpayer behavior, such efforts should focus instead and also on certain rogue practices adopted by national tax authorities.

  97. 97.

    Marian, O., supra note 84, 217.

  98. 98.

    Code of Conduct Group, Guidance on the conditions and rules for the issuance of tax rulings—standard requirements for good practice by Member States, agreed on November 2016, doc. 14750/16.

  99. 99.

    Ibid.

  100. 100.

    Thomson, A., & Hardwick, E., supra note 54, 48.

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    Chiara Francioso

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Francioso, C. (2019). State Aid and Tax Rulings: Managing the Risk of Recovery. In: De Vincentiis, P., Culasso, F., Cerrato, S.A. (eds) The Future of Risk Management, Volume I. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-14548-4_15

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