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Tax Incentives as State Aid

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EU Competition and State Aid Rules

Part of the book series: Europeanization and Globalization ((EAG,volume 3))

Abstract

In the European Union, direct taxation is generally a matter of national law that falls within the exclusive competence of the Member States. While Member States are free to design their own tax systems as they see fit, they must comply with Union law, including the rules on State aid. In recent years, the Commission has embarked on an ambitious path of using the State aid rules to address Member States’ tax treatment of some of the world’s largest multinationals. In doing so, it has had to grapple with some of the most challenging questions in EU State aid law and its interface with national fiscal regimes, namely in relation to determining when a tax measure is ‘selective’ by favouring certain undertakings or the production of certain goods. The appropriateness and legitimacy of the use of State aid rules as a tool to achieve these goals aside, the Commission’s recent enforcement efforts have raised some important questions concerning the interpretation of the selectivity criterion under EU State aid law. This criterion will be tested before the EU courts in pending cases in the near future, and this could have far-reaching consequences for the reach of EU State aid law enforcement and, ultimately, the scope of Member States’ sovereignty in the field of taxation.

The views expressed in this paper are those of the author alone, and should not be attributed directly or indirectly to Quinn Emanuel Urquhart & Sullivan UK LLP.

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Notes

  1. 1.

    Article 113 of the Treaty on the Functioning of the European Union (TFEU).

  2. 2.

    Case C-446/03 Marks & Spencer ECLI:EU:C:2005:763, para 29.

  3. 3.

    The European Commission’s latest scoreboard figures up until 2014 show that, in the last decade, tax exemptions have accounted for at least 30% of all Member State aid measures, save in 2006 when the figure dipped to 28.5%: European Commission State Aid Scoreboard 2015.

  4. 4.

    Financial Times, ‘Vestager denies Brussels is targeting US companies in tax probes’, 29 February 2016.

  5. 5.

    See Luja (2003) at 484.

  6. 6.

    See the Opinion of Advocate General Geelhoed in Case C-308/01 GIL Insurance and Others ECLI:EU:C:2004:252, paras 74–77.

  7. 7.

    Quigley (2015), p. 150.

  8. 8.

    Conclusions of the ECOFIN Council Meeting on 1 December 1997 concerning taxation policy (98/C 2/01), Annex 1, Resolution of the Council and the Representatives of the Governments of the Member States, meeting within the Council of 1 December 1997 on a code of conduct for business taxation [1998] OJ C 2/1.

  9. 9.

    Report of the Code of Conduct (Business Taxation) of 23 November 1999, SN 4901/99, to the ECOFIN Council on 29 November 1999.

  10. 10.

    Commission Notice on the application of State aid rules to measures relating to direct business taxation [1998] OJ C 384/3. The repeal of the 1998 Notice is provided for in the 2016 Commission Notice on the notion of State aid pursuant to Article 107(1) TFEU [2016] OJ C 262/01, para 229.

  11. 11.

    Commission 1998 Notice (n 10), para 2.

  12. 12.

    Commission 1998 Notice (n 10), para 4.

  13. 13.

    Commission Decision 2003/512/EC of 5 September 2002 on State Aid C 47/01, German Coordination Centres, [2003] OJ L 177/17; Commission Decision 2003/501/EC of 16 October 2002 on State Aid C 49/2001, Luxembourg Coordination Centres [2003] OJ L 153/40; Commission Decision 2003/755/EC of 17 February 2003 on State Aid C 15/02, Belgian coordination centres [2003] OJ L 282/25.

  14. 14.

    Commission Decision 2004/76/EC of 13 May 2003 on State Aid C 45/2001, French Headquarters and Logistic Centres [2004] OJ L 23/1.

  15. 15.

    Commission Decision 2003/438/EC of 16 October 2002 on State Aid C 50/2001, Luxembourg Finance Companies, [2003] OJ L 153/40.

  16. 16.

    Commission Decision 2003/883/EC of 11 December 2002 on State Aid C 46/2001, Central Corporate Treasuries [2003] OJ L 330/23.

  17. 17.

    OECD (2013).

  18. 18.

    See Desai (2014), p. 575.

  19. 19.

    European Commission Press Release 2014b IP/14/663.

  20. 20.

    European Commission Press Release 2015b IP/14/1105.

  21. 21.

    European Commission Press Release 2015c IP/15/6221.

  22. 22.

    European Commission Press Release 2015d IP/15/4080.

  23. 23.

    The terms of Article 92(1) of the Treaty of Rome 1957 are essentially mirrored in Article 107(1) TFEU.

  24. 24.

    Cases 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v. High Authority ECLI:EU:C:1961:2, p 19; confirmed in Case C-387/92 Banco Exterior de España v. Ayuntamiento de Valencia ECLI:EU:C:1994:100, para 13.

  25. 25.

    Case C-173/73 Italy v. Commission ECLI:EU:C:1974:71.

  26. 26.

    Case 173/73 (n 25), para 13; Case C-241/94 France v. Commission CLI:EU:C:1996:353, paras 19 and 20.

  27. 27.

    2016 Notice, paras 156–184.

  28. 28.

    Case C-156/98 Germany v. Commission ECLI:EU:C:2000:467, para 26.

  29. 29.

    Commission 1998 Notice (n 10), para 10.

  30. 30.

    Case C-730/79 Philip Morris v. Commission ECLI:EU:C:1980:209, para 11.

  31. 31.

    Case C-280/00 Altmark Trans and Regierungspräsidium Magdeburg ECLI:EU:C:2003:415, para 81.

  32. 32.

    Commission 1998 Notice (n 10), para 11; Case C-280/00 Altmark Trans and Regierungspräsidium Magdeburg, para 92.

  33. 33.

    Case C-301/87 France v. Commission ECLI:EU:C:1990:67; Case C-86/89 Italy v. Commission ECLI:EU:C:1990:373; and Case C-156/98 Germany v. Commission ECLI:EU:C:2000:467, para 30.

  34. 34.

    Commission 1998 Notice (n 10), para 12. Case C-143/99 Adria-WienPipeline and Wietersdorfer & Peggauer Zementwerke ECLI:EU:C:2001:598, para 41; Case C-308/01 GIL Insurance and Others ECLI:EU:C:2004:252, para 68; and Case C-172/03 Heiser ECLI:EU:C:2005:130, para 40.

  35. 35.

    Commission 1998 Notice (n 10), para 26.

  36. 36.

    Luts (2014/2015), p. 263.

  37. 37.

    It is not sufficient that the measure is available to a wide range of operators and sectors. Therefore, neither the large number of eligible undertakings nor the diversity of the sectors to which they belong provides grounds for concluding that the measure constitutes a general measure of economic policy: Adria-WienPipeline and Wietersdorfer & Peggauer Zementwerke (n 34), para 48.

  38. 38.

    Commission 1998 Notice (n 10), para 14.

  39. 39.

    Case C-88/03 Portugal v. Commission ECLI:EU:C:2006:511, para 56.

  40. 40.

    Portugal v. Commission (n 39), para 56; Joined Cases C-78/08 to C-80/08 Paint Graphos and Others ECLI:EU:C:2011:550, para 49.

  41. 41.

    Portugal v. Commission (n 39), paras 67–68.

  42. 42.

    Portugal v. Commission (n 39), para 79.

  43. 43.

    Case C-106/09 P Commission and Spain v. Government of Gibraltar and United Kingdom ECLI:EU:C:2011:732.

  44. 44.

    Commission and Spain (n 43), paras 90 and 91.

  45. 45.

    Commission and Spain (n 43), para 93.

  46. 46.

    Commission and Spain (n 43), para 104.

  47. 47.

    Commission and Spain (n 43), paras 101, 106 and 107.

  48. 48.

    Case C-399/10 Banco Santander and Santusa v. Commission ECLI:EU:T:2014:938.

  49. 49.

    Case T-219/10 Autogrill España v. Commission ECLI:EU:T:2014:939.

  50. 50.

    This can be contrasted with the ruling in Joined Cases T-227/01 to T-229/01, T-265/01, T-266/01 and T-270/01 Diputación Foral de Álav and Gobierno Vasco v. Commission ECLI:EU:T:2009:315, concerning a tax credit available to undertakings in the Basque region in respect of investments in new fixed assets exceeding ESP 2 500 million. The General Court held that the Basque authorities had thereby restricted the tax advantage in question to undertakings which have at their disposal significant financial resources, and that the measure was therefore selective.

  51. 51.

    Banco Santander and Santusa (n 48), para 72; Case T-219/10, Autogrill España (n 49), para 68.

  52. 52.

    Case C-20/15 P Commission v. Autogrill España; Case C-21/15 P Commission v. Banco Santander and Santusa.

  53. 53.

    See Financial Times, 13 June 2013.

  54. 54.

    European Commission Press Release 2014b IP/14/663.

  55. 55.

    Commission Decision C(2008)467 final of 13 February 2008 on State Aid N 480/2007, Spain – The reduction of tax from intangible assets [2008] OJ C 80/1, paras 14 to 18.

  56. 56.

    OECD (2015).

  57. 57.

    Case C-241/94 France v. Commission ECLI:EU:C:1996:353, paras 23 and 24.

  58. 58.

    1998 Notice, para 22.

  59. 59.

    Commission 2016 Notice, paras 123–125.

  60. 60.

    Diputación Foral de Álav and Gobierno Vasco (n 50), para 154.

  61. 61.

    Case C-6/12 P P Oy, ECLI:EU:C:2013:525, paras 26 and 27.

  62. 62.

    Commission Decision C(2014) 3627 final of 11 June 2014, State Aid SA 38375 (2014/NN) (ex 2014/CP), Luxembourg – Alleged aid to FFT, paras 11 to 13.

  63. 63.

    See Commission 2016 Notice, paras 169 and 170.

  64. 64.

    European Commission Press Release 2014a IP/14/2742.

  65. 65.

    ESA Press Release 2016 PR(6)09.

  66. 66.

    Case No SA 38375 (Fiat); European Commission Press Release 2015a IP 15/5880.

  67. 67.

    Case T-755/15 Luxembourg v. Commission [2016] OJ C 59/48.

  68. 68.

    Case T-759/15 Fiat Chrysler Finance Europe v. Commission [2016] OJ C 59/49.

  69. 69.

    Case T-760/15 Netherlands v. Commission [2016] OJ C 59/50.

  70. 70.

    Case No SA 37667 (Excess profit exemption in Belgium); Commission Press Release 2016 IP/16/42.

  71. 71.

    Case C-182/03 Belgium and Forum 187 v. Commission ECLI:EU:C:2006:416, para 95.

  72. 72.

    Commission Decision C(2014) (n 62), para 61.

  73. 73.

    See Commission 2016 Notice, para 174.

  74. 74.

    Commission 2016 Notice, para 174.

  75. 75.

    Financial Times, 26 January 2016.

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Authors and Affiliations

  1. Quinn Emanuel Urquhart & Sullivan UK LLP, London, UK

    Nicola Chesaites

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  1. Nicola Chesaites
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Correspondence to Nicola Chesaites .

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Editors and Affiliations

  1. General Court of EU, Luxembourg, Luxembourg

    Vesna Tomljenović

  2. Faculty of Law, University of Rijeka, Rijeka, Croatia

    Nada Bodiroga-Vukobrat

  3. Faculty of Law, University of Rijeka, Rijeka, Croatia

    Vlatka Butorac Malnar

  4. Faculty of Law, University of Rijeka, Rijeka, Croatia

    Ivana Kunda

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Chesaites, N. (2017). Tax Incentives as State Aid. In: Tomljenović, V., Bodiroga-Vukobrat, N., Butorac Malnar, V., Kunda, I. (eds) EU Competition and State Aid Rules. Europeanization and Globalization, vol 3. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-47962-9_12

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  • DOI: https://doi.org/10.1007/978-3-662-47962-9_12

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