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Selectivity in European State Aid? – A comprehensive review of the selectivity criterion applied to tax measures

Vidmar, Andréas LU (2017) LAGM01 20171
Department of Law
Abstract (Swedish)
Ekonomiska diskrepanser mellan länder och företag globalt skapar krav och behov för reglering av beviljande av bidrag eller statligt stöd på internationell nivå. I dess frånvaro skulle länder kunna ge vinster till produkter och kringgå konkurrens med otillbörlig förskjutning av varor som skulle ha behövt samma subventioner för att ha en ärbar chans att konkurrera med. Detta skulle bidra till ett ökat gap mellan medlemsstater med mer ekonomisk makt och de med mindre ekonomisk makt. Således, hade det gett bränsle åt en tillsynes instabil världspolitik att emanera ifrån.
De grundande medlemsstaterna i EEG-fördraget kom överens om en gemensam definition av begreppet "statligt stöd", inklusive de kriterier som omfattar statligt stöd. Elementen... (More)
Ekonomiska diskrepanser mellan länder och företag globalt skapar krav och behov för reglering av beviljande av bidrag eller statligt stöd på internationell nivå. I dess frånvaro skulle länder kunna ge vinster till produkter och kringgå konkurrens med otillbörlig förskjutning av varor som skulle ha behövt samma subventioner för att ha en ärbar chans att konkurrera med. Detta skulle bidra till ett ökat gap mellan medlemsstater med mer ekonomisk makt och de med mindre ekonomisk makt. Således, hade det gett bränsle åt en tillsynes instabil världspolitik att emanera ifrån.
De grundande medlemsstaterna i EEG-fördraget kom överens om en gemensam definition av begreppet "statligt stöd", inklusive de kriterier som omfattar statligt stöd. Elementen av en fördel, selektivitet, påverkan på handeln, snedvridning av konkurrensen och härrörande från staten.

Artikel 107 (1) i TFEU-fördraget finner att något stöd som beviljas av en medlemsstat eller genom statliga medel, i vilken form som helst, som vanställer eller hotar att snedvrida konkurrensen genom att gynna vissa företag eller produktionen av vissa varor, i den mån det påverkar handeln mellan medlemsstaterna - är otillbörlig.
Som tidigare nämnts måste en åtgärd för att kunna utgöra en statligt stödåtgärd, i EU:s mening, innehålla fyra olika kumulativa kriterier som måste vara uppfyllda.
När det gäller statligt statsstöd i form av skatteåtgärder kan man dock lätt förstå att kommissionen enkelt kan bevisa de flesta kriterierna. Nationella skatteåtgärder fastställs av medlemsstaten. Underbetalning av skatt kommer att skapa en nedgång som kommer att ge en fördel för någon annan (selektivitet). Denna fördel kan eventuellt hota att snedvrida konkurrensen

och om förvrängningen är tillräckligt stor kan den påverka handeln mellan medlemsstaterna.
Selektivitets-kriteriet är ett av de mest definierande kriterierna för statligt stöd. Kriteriet ställer komplexa frågeställningar eftersom det inte finns någon harmonisering på gemenskapsnivå av medlemsstaternas skattebestämmelser. Lägg till omständigheten att multinationella företag betalar skatter i olika jurisdiktioner som har olika skattesatser och resultatet av ett svårligen komplext rättsområde tar vid. Således måste bedömningen av förenligheten i artikel 107 (1) i TFEU-fördraget ske genom att det statliga skattesystemet i den stat som beviljar stödet överensstämmer.

Medlemsstaternas skattemyndigheter kan ge företagen specifika beslut som är relevanta för deras affärsmodeller för att klargöra hur företaget ska bli skattepliktigt under vissa omständigheter. Medan sådana skattebeslut är lagliga i allmänhet kan de bryta mot reglerna om statligt stöd om de använder metoder för att fastställa överföringspriser utan ekonomisk motivering som avviker från arms längd-principen och som otillbörligt ändrar vinsten för att minska de skatter som de betalar.

Men med tanke på att skatteåtgärder traditionellt har knutits till statens suveränitet är regleringen av statligt stöd en känslig fråga. Det finns inga överraskande känslor att det aktuella området väcker ganska stora farhågor från företag som åberopar en medlemsstats fiskala autonomi.
Denna avhandling granskar det rättsliga, historiska och sedermera moderna utvecklade omfattningen av statligt stöd som tillämpas på skatteåtgärder inom EU, särskilt när man tar itu med undantagsmetoden och kriteriet för selektivitet. Den analyserar den senaste tidens rättspraxis och kommer fram till slutsatsen att transparensen inom rättsområdet inte är lika klart genomsyrat ur ett rättsdogmatiskt perspektiv. Det visar på ett väl genomarbetat område i konstant förändring med ett visst diffust ställningstagande i frågor som rör selektivitet i skatteåtgärder, särskilt vid tillämpning av undantagsmetoden vid skatteåtgärder. (Less)
Abstract
Economic differences between countries and undertakings on a worldwide scale creates necessities for regulation on the granting of subsidies or State aid at the international level. In its absence, countries would be able to grant benefits to products and circumventing competition with unfairly displacement of goods that would have needed the same subsidies to have a decent chance at competing. This would contribute to an increased gap between the countries with more economic power and the countries with less economic power. Thus, an unstable world policy could, as a result, emerge.

The founding Member States of the EEC Treaty agreed on a common definition of the terminology around ‘state aid’ including the criteria which encompasses... (More)
Economic differences between countries and undertakings on a worldwide scale creates necessities for regulation on the granting of subsidies or State aid at the international level. In its absence, countries would be able to grant benefits to products and circumventing competition with unfairly displacement of goods that would have needed the same subsidies to have a decent chance at competing. This would contribute to an increased gap between the countries with more economic power and the countries with less economic power. Thus, an unstable world policy could, as a result, emerge.

The founding Member States of the EEC Treaty agreed on a common definition of the terminology around ‘state aid’ including the criteria which encompasses State aid; the elements of an advantage, selectivity, affection on trade, distortion of competition and originating from the State.
Article 107(1) TFEU prohibits any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, insofar as it affects trade between Member States.

As have been previously mentioned, for a measure to constitute a State aid
measure: four different cumulative criterion has to be met.3 However, when
it comes to fiscal State aid, one can easily understand that the Commission can prove most of the criteria easily; National tax measures are set out by the Member State; underpayment of tax will create a downfall which will give an advantage; this advantage will possibly threaten to distort competition; and, if the distortion is substantial enough, can have an effect on trade between Member States.

The selectivity criterion is, one of the most defining criteria for State aid.5 The criterion additionally raises complex questions to the fiscal measures since there is no community-level harmonisation of the tax provisions of the Member States. In addition to this, multinational companies pay taxes in different jurisdictions which have different tax rates. Thusly, the assessment of the compatibility within article 107 (1) TFEU must be done through the consistency of the national tax system of the State conferring the aid.

The Member States tax authorities may give companies specific rulings relevant to their business models to clarify how the undertaking will be taxable under certain circumstances. While such tax rulings are legal in general, they may violate State aid rules if they use methodologies to establish transfer prices with no economic justification that depart from the arm’s length principle and which unduly shift profit to reduce the taxes they pay.

However, bearing in mind, that State aids traditionally have been tied to the State’s sovereignty, the regulation of State aid law is a delicate matter.There is no surprising emotion, that the area at hand awakes rather large concerns from undertakings relying on a State’s fiscal autonomy.

This thesis reviews the legal, historical and modern scope of State aid applied to tax measures, especially when addressing the derogation method and the criterion of selectivity. It analyses the recent case-law and ends up in the conclusion of an area somewhat more transparent although with a remaining existing blur on matters relating to selectivity in tax measures especially when applying the derogation method in tax measures. (Less)
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author
Vidmar, Andréas LU
supervisor
organization
course
LAGM01 20171
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
EU law, fiscal law, competition law, law, State aid, tax measures, The apple case, APAs, the derogation method, fiscal autonomy, tax rulings
language
English
id
8908759
date added to LUP
2017-07-11 16:57:41
date last changed
2017-07-11 16:57:41
@misc{8908759,
  abstract     = {Economic differences between countries and undertakings on a worldwide scale creates necessities for regulation on the granting of subsidies or State aid at the international level. In its absence, countries would be able to grant benefits to products and circumventing competition with unfairly displacement of goods that would have needed the same subsidies to have a decent chance at competing. This would contribute to an increased gap between the countries with more economic power and the countries with less economic power. Thus, an unstable world policy could, as a result, emerge.

The founding Member States of the EEC Treaty agreed on a common definition of the terminology around ‘state aid’ including the criteria which encompasses State aid; the elements of an advantage, selectivity, affection on trade, distortion of competition and originating from the State.
Article 107(1) TFEU prohibits any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, insofar as it affects trade between Member States.

As have been previously mentioned, for a measure to constitute a State aid
measure: four different cumulative criterion has to be met.3 However, when
it comes to fiscal State aid, one can easily understand that the Commission can prove most of the criteria easily; National tax measures are set out by the Member State; underpayment of tax will create a downfall which will give an advantage; this advantage will possibly threaten to distort competition; and, if the distortion is substantial enough, can have an effect on trade between Member States.

 The selectivity criterion is, one of the most defining criteria for State aid.5 The criterion additionally raises complex questions to the fiscal measures since there is no community-level harmonisation of the tax provisions of the Member States. In addition to this, multinational companies pay taxes in different jurisdictions which have different tax rates. Thusly, the assessment of the compatibility within article 107 (1) TFEU must be done through the consistency of the national tax system of the State conferring the aid.

The Member States tax authorities may give companies specific rulings relevant to their business models to clarify how the undertaking will be taxable under certain circumstances. While such tax rulings are legal in general, they may violate State aid rules if they use methodologies to establish transfer prices with no economic justification that depart from the arm’s length principle and which unduly shift profit to reduce the taxes they pay.

However, bearing in mind, that State aids traditionally have been tied to the State’s sovereignty, the regulation of State aid law is a delicate matter.There is no surprising emotion, that the area at hand awakes rather large concerns from undertakings relying on a State’s fiscal autonomy.

This thesis reviews the legal, historical and modern scope of State aid applied to tax measures, especially when addressing the derogation method and the criterion of selectivity. It analyses the recent case-law and ends up in the conclusion of an area somewhat more transparent although with a remaining existing blur on matters relating to selectivity in tax measures especially when applying the derogation method in tax measures.},
  author       = {Vidmar, Andréas},
  keyword      = {EU law,fiscal law,competition law,law,State aid,tax measures,The apple case,APAs,the derogation method,fiscal autonomy,tax rulings},
  language     = {eng},
  note         = {Student Paper},
  title        = {Selectivity in European State Aid? – A comprehensive review of the selectivity criterion applied to tax measures},
  year         = {2017},
}