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The EU State Aid Prohibition and Taxation – The Expanding Scope of Art. 107 TFEU

Häggqvist, Åke LU (2017) LAGM01 20171
Department of Law
Abstract
A topic that has received a significant amount of attention within the international community is the concept of harmful tax competition. This is of particular relevance to the EU due to the additional exposure to this problem the Member States experience by virtue of the internal market. A closely related concept is that of aggressive tax planning where multinational enterprises abuse mismatches between tax systems allowing them to pay low or no tax on large parts of their profits. The Commission’s recent State aid investigations into the advanced rulings handed out by Member States is an attempt to resolve a situation where Member States facilitate tax avoidance for tax competition purposes. This paper focus on the four investigations... (More)
A topic that has received a significant amount of attention within the international community is the concept of harmful tax competition. This is of particular relevance to the EU due to the additional exposure to this problem the Member States experience by virtue of the internal market. A closely related concept is that of aggressive tax planning where multinational enterprises abuse mismatches between tax systems allowing them to pay low or no tax on large parts of their profits. The Commission’s recent State aid investigations into the advanced rulings handed out by Member States is an attempt to resolve a situation where Member States facilitate tax avoidance for tax competition purposes. This paper focus on the four investigations where a final decision has been reached: Starbucks, Fiat, Apple and Excess Profit.

The paper introduces the reader to the background of tax competition before explaining the current state of the law surrounding the notion of State aid in Art. 107. The focus is on the concept of the selective advantage in the area of tax law. A review of the ECJ’s case law in this area show a significant degree of inconsistency in how the test of selective advantage is to be applied. The ECJ puts a major emphasis on the question of competitive advantages being granted on a discriminatory basis. This is contrary to the traditional idea of State aid which require there to be a transfer of state resources to an undertaking. But the ECJ seem to consider evidence of unequal treatment under the tax laws as enough to raise a presumption that this prerequisite is fulfilled.

Using that logic the Commission argues in the cases mentioned above that a failure to abide by the OECD’s arm’s length principle in the area of transfer pricing is contrary to Art. 107. As this paper illustrates this further expands the scope of Art. 107 to such a degree that the Commission can be regarded as harmonizing this area of law through the State aid process. This paper argues that this interpretation by the Commission infringes too much on the Member States’ tax sovereignty and that a more restrictive approach to the State aid test is needed. (Less)
Abstract (Swedish)
Ett ämne som väckt stora diskussioner inom internationell skatterätt är fenomenet skadlig skattekonkurrens mellan länder. Detta är speciellt relevant för EU-samarbetet då den inre marknaden innebär ökade möjligheter för länder att delta i sådan konkurrens. Ett närliggande problem är så kallat aggressiv skatteplanering som avser när multinationella företag utnyttjar skiljaktigheter mellan jurisdiktioner för att tillägna sig skattemässiga fördelar. Kommissionen nådde nyligen fyra beslut där medlemsstater hade givit ut förhandsbeslut som hade faciliterat sådan skatteplanering; Starbucks, Fiat, Apple och Excess Profits. Detta ansågs av Kommissionen vara statligt stöd. Denna uppsats fokuserar på en rättslig analys av dessa.

Uppsatsen... (More)
Ett ämne som väckt stora diskussioner inom internationell skatterätt är fenomenet skadlig skattekonkurrens mellan länder. Detta är speciellt relevant för EU-samarbetet då den inre marknaden innebär ökade möjligheter för länder att delta i sådan konkurrens. Ett närliggande problem är så kallat aggressiv skatteplanering som avser när multinationella företag utnyttjar skiljaktigheter mellan jurisdiktioner för att tillägna sig skattemässiga fördelar. Kommissionen nådde nyligen fyra beslut där medlemsstater hade givit ut förhandsbeslut som hade faciliterat sådan skatteplanering; Starbucks, Fiat, Apple och Excess Profits. Detta ansågs av Kommissionen vara statligt stöd. Denna uppsats fokuserar på en rättslig analys av dessa.

Uppsatsen förklarar innebörden av skattekonkurrens i en kortare bakgrundsdel innan den sedan fortsätter med en analys av rättsläget. Fokuset ligger på frågan om hur statligt stöd ska definieras under Art. 107. Det visar sig att ECJ’s praxis angående denna fråga inte är konsekvent. Domstolen använder en mycket vid definition av statligt stöd genom att fokusera på om konkurrensfördelar föreligger mellan jämförbara företag som följd av skattereglerna. I domstolens ögon är det ofta tillräckligt att bevisa att så är fallet för att rekvisiten angående statliga resurser och ekonomisk gynning ska vara presumerade uppfyllda.

Kommissionen utnyttjar denna praxis för att argumentera för att medlemsstater bryter mot reglerna angående statligt stöd om de inte applicerar armlängdsprincipen i enlighet med OECD’s riktlinjer. Denna uppsats tar en kritisk syn på detta och visar att kommissionen i själva verket harmoniserar skattereglerna i EU på detta område genom dess tillämpning av Art. 107. Detta kritiseras i uppsatsen för att gå för långt i inskränkningen av medlemsstaternas kompetens inom skatteområdet. Författaren argumenterar därefter för en mer restriktiv praxis på detta rättsområde. (Less)
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author
Häggqvist, Åke LU
supervisor
organization
course
LAGM01 20171
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
EU-Rätt, EU-Law, statligt stöd, state aid, skatterätt, tax law, transfer pricing, tax competition, aggressive tax planning
language
English
id
8908755
date added to LUP
2017-06-07 17:20:19
date last changed
2017-06-07 17:20:19
@misc{8908755,
  abstract     = {A topic that has received a significant amount of attention within the international community is the concept of harmful tax competition. This is of particular relevance to the EU due to the additional exposure to this problem the Member States experience by virtue of the internal market. A closely related concept is that of aggressive tax planning where multinational enterprises abuse mismatches between tax systems allowing them to pay low or no tax on large parts of their profits. The Commission’s recent State aid investigations into the advanced rulings handed out by Member States is an attempt to resolve a situation where Member States facilitate tax avoidance for tax competition purposes. This paper focus on the four investigations where a final decision has been reached: Starbucks, Fiat, Apple and Excess Profit.
 
The paper introduces the reader to the background of tax competition before explaining the current state of the law surrounding the notion of State aid in Art. 107. The focus is on the concept of the selective advantage in the area of tax law. A review of the ECJ’s case law in this area show a significant degree of inconsistency in how the test of selective advantage is to be applied. The ECJ puts a major emphasis on the question of competitive advantages being granted on a discriminatory basis. This is contrary to the traditional idea of State aid which require there to be a transfer of state resources to an undertaking. But the ECJ seem to consider evidence of unequal treatment under the tax laws as enough to raise a presumption that this prerequisite is fulfilled.
 
Using that logic the Commission argues in the cases mentioned above that a failure to abide by the OECD’s arm’s length principle in the area of transfer pricing is contrary to Art. 107. As this paper illustrates this further expands the scope of Art. 107 to such a degree that the Commission can be regarded as harmonizing this area of law through the State aid process. This paper argues that this interpretation by the Commission infringes too much on the Member States’ tax sovereignty and that a more restrictive approach to the State aid test is needed.},
  author       = {Häggqvist, Åke},
  keyword      = {EU-Rätt,EU-Law,statligt stöd,state aid,skatterätt,tax law,transfer pricing,tax competition,aggressive tax planning},
  language     = {eng},
  note         = {Student Paper},
  title        = {The EU State Aid Prohibition and Taxation – The Expanding Scope of Art. 107 TFEU},
  year         = {2017},
}