Taxation and state aid: the notion of fiscal state aid and the Commission's new approach
This thesis examines the notion of State aid, encompassed in Article 107(1) TFEU, as it applies to fiscal cases. This analysis is important, as the notion of fiscal aid is, due to its fiscal subject matter, different from the notion of aid as it applies to non-fiscal cases, and due to the political sensitivity of taxation as an area of exclusive Member State competence. Furthermore, the examination of the notion of fiscal aid and its limits allows for a critical analysis of the Commission’s investigations into aggressive tax planning via tax rulings. The tax ruling Decisions have several problematic elements, which can only be fully appraised in the context of the notion of fiscal aid, as it emerges from the CJEU’s case law. Part I of the thesis examines the individual criteria of Article 107(1) TFEU that make up the notion of aid, as well as the compatibility regime applicable to fiscal State aid. That regime is the first to be examined, and it is shown that fiscal aid measures have to overcome more hurdles to be deemed compatible with the internal market when compared with non-fiscal ones. With the limited compatibility of fiscal aids established, the thesis moves on to examine the conditions of fiscal aid. This analysis starts with the notion of selectivity, which is generally considered to be the most relevant one in fiscal cases. The analysis of the notion and of the test employed, showcases a consistent widening of fiscal selectivity, which can lead to general measures falling within the scope of the State aid prohibition. The problems stemming from the determination of the reference framework and the comparability exercise are discussed in this context. Then, the notion of advantage as it applies to fiscal cases is discussed. It is shown that the MEOP cannot be readily applied to fiscal cases due to its internal logic, reducing the advantage analysis in fiscal cases to a bare-bones version of the selectivity analysis. However, the evidential burden attached to the notion of advantage also demonstrates the importance of the fiscal context in which a measure is to be assessed. The following Chapter discusses the remaining three criteria, namely the granting of aid through State resources, and the quasi-jurisdictional criteria of effect on trade and distortion of competition. It is shown that due to the State resources criterion’s inherent logic its relevance is limited in fiscal cases, while it is also demonstrated that the two quasi-jurisdictional criteria are almost always satisfied, especially in fiscal cases. Thus, Part I of this thesis demonstrates that selectivity is the crux of the fiscal aid analysis, despite the practical importance of advantage, and that the widening of fiscal selectivity in effect translates into a widening of the notion of fiscal aid. Based on the findings of Part I, Part II discusses the State aid tax ruling Decisions. The relevant fiscal concepts, in particular tax rulings, transfer pricing, and the arm’s length principle (ALP) are discussed, alongside the factual patterns and basic reasoning of the Decisions. This allows for a critical analysis of the Decisions in their fiscal context, through which it is demonstrated that the invention of an EU ALP is problematic on multiple fronts, from the creation of legal uncertainty to the limitation of Member States’ fiscal sovereignty. It is also shown that the definition of the reference framework, and the combination of selectivity and advantage criteria are equally problematic. It is also shown that the problems in the reasoning of the tax ruling Decisions can to an extent be traced back to the problems that exist in the notion of fiscal aid. Based on Parts I and II, the thesis concludes that the core problem with the notion of fiscal State aid is the definition of selectivity and its limits, as it is in effect the only analytically substantive criterion. It is shown that its excessive widening can limit fiscal sovereignty, and can lead to radically novel concepts, like the EU ALP. As a result, the adoption of a more fiscal outlook is advocated for the entirety of the notion of fiscal aid, and specifically the criteria of selectivity and advantage.