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Fiscal State Aid: On Tax Exemptions and Reimbursement of Taxes

Published online by Cambridge University Press:  27 October 2017

Philipp Werner
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Extract

Fiscal state aid is an important aspect of state aid law. Aid granted though fiscal measures accounted for more than 40 per cent of aid granted in 2003–5. According to a recent study, allegations that fiscal measures constitute illegal aid account for more than 50 per cent of state aid cases before national courts. The European Commission and European as well as national courts are thus increasingly being called upon to consider the extent to which state aid rules apply to fiscal measures.

Type
Research Article
Information
Cambridge Yearbook of European Legal Studies , Volume 9 , 2007 , pp. 481 - 505
Copyright
Copyright © Centre for European Legal Studies, Faculty of Law, University of Cambridge 2007

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References

1 Report of the European Commission State Aid Scoreboard, Brussels 11 Dec 2006, COM(2006)761 final.

2 Jestaedt, T, Derenne, J and Ottervanger, T Study on the Enforcement of State Aid Law at National Level (Luxemburg, Office for Official Publications of the European Communities, 2006) 41 Google Scholar.

3 Reflecting the political nature of taxation, Art 94 EC requires unanimity to authorise Community measures on direct taxation.

4 See Jestaedt, T ‘Steuern und Abgaben’ in Heidenhain, M (ed) Handbuch des Europäischen Beihilfenrechts (Munich, Beck Juristischer Verlag, 2003) 152 Google Scholar.

5 Case 173/73, Italy v Commission [1974] ECR 709.

6 Case C–387/92, Banco Exterior de Espana [1994] ECR I–877, para 13.

7 Case C– 379/98, Preussen Elektra v Schleswag [2002] ECR I–2099.

8 Schütte, M ‘ The Notion of State Aid‘ in Sanchez Rydelski, M (ed) The EC State Aid Regime (London, Cameron May, 2006) 39 Google Scholar.

9 Plender, R ‘Definition of Aid‘ in Biondi, A, Eeckhout, P and Flynn, J (eds) The Law of State Aid in the European Union (Oxford, OUP, 2004) 31 Google Scholar.

10 Case 730/79, Philip Morris v Commission [1980] ECR 2671.

11 Case T–67/94, Ladbroke Racing Ltd v Commission [1998] ECR II–1, para 52.

12 Case C–39/94, SFEI v La Poste [1996] ECR I–3547.

13 Commission notice on the application of the state aid rules to measures relating to direct business taxation, OJ 1998 C 384/3 (hereafter the ‘Commission notice on direct business taxation‘).

14 Case 173/73, Italy v Commission [1974] ECR 709, para 13.

15 See Case C–387/92, Banco Exterior de Espana v Ayuntamiente de Valencia [1994] ECR I–877, para 14; Case C–200/97, Ecotrade v AFS [1998] ECR I–7907, para. 34 and Case C–6/97, Italy v Commission [1999] ECR I–2981, para 16.

16 See above n 17.

17 Case T–346/99, Diputación Foral de Álava and others v Commission [2002] ECR II–4259, para 83.

18 O’Brien, M ‘Company Taxation, State Aid and Fundamental Freedoms: is the Next Step Enhanced Cooperation?‘ (2005) 30 EL Rev 209, 220Google Scholar.

19 Case 30/59, Steekolenmijnen v High Authority [1961] ECR 1, para 43; C–75/97, Belgium v Commission [1999] ECR I–3671, para 23.

20 Di Bucci, V ‘Direct Taxation—State Aid in Form of Fiscal Measures’ in Sanchez Rydelski, M (ed), above n 8, 73.

21 The case law provides various examples of the reduction of tax burdens. See O´Brien, M, above n 18, 221 for further examples.

22 Case C–143/99, Adria-Wien Pipeline GmbH v Finanzlandesdirektion für Kärnten [2001] ECR I–8365.

23 Case C–6/97, Italy v Commission [1999] ECR I–2981, para 27.

24 See Case C–387/92, Banco Exterior de Espana v Ayuntamiente de Valencia [1994] ECR I–877, para 14.

25 Commission notice on direct business taxation, above n 13, para. 10.

26 Joined Cases C–182 and 217/03, Belgium and Forum 187 v Commission, not yet reported, para 129.

27 Ibid.

28 Case C–379/98, Preussen Elektra v Schleswag [2002] ECR I–2099.

29 Schütte, M, above n 8, 41.

30 Commission decision in Case N 661/99, OJ 2000 C 113/3.

31 Commission notice on direct business taxation, above n 13, para 16. The selective nature of an aid measure may also derive from a discretionary practice from the tax authorities: ibid, para 21.

32 Ibid, para 13.

33 Case 173/73, Italy v Commission [1974] ECR 709, paras 33 and 35; Joined Cases T–92 and 103/00, Diputacion Foral de Alava v Commission [2002] ECR II–1385, para. 60.

34 Case C–143/99, Adria-Wien Pipeline v Landesfinanzdirektion Kärnten [2001] ECR I–8365, para 35.

35 Commission Decision 2006/269/EC, OJ 2006 L 99/21.

36 An interesting question (which will not be treated here) therefore is how to distinguish the application of state aid rules from the application of the rule on tax discrimination.

37 Commission notice on direct business taxation, above n 13, para 16. There are slightly different formulations of this test but it is generally accepted that they do involve a different substantive assessment: O’Brien, M, above n 18, 223.

38 See Commission notice on direct business taxation, above n 13, para 16.

39 Di Bucci, V, above n 20, 77.

40 Case C–75/97, Belgium v Commission [1999] ECR I–2671, paras 28–31.

41 O’Brien, M, above n 18, 226.

42 Case C–143/99, Adria-Wien Pipeline v Landesfinanzdirektion Kärnten [2001] ECR I–8365, paras 47–53.

43 See Commission Decision 2005/261/EC, OJ 2005 L 85/1, para 98 and Commission Notice on direct business taxation, above n 13, para 13.

44 Commission Decision 2005/261/EC, OJ 2005 L 85/1, para 98.

45 Commission Notice on direct business taxation, above n 13, para 13.

46 Commission Decision 2005/261/EC, OJ 2005 L 85/1, para 106.

47 Ibid, para 105.

48 Case T–210/02, British Aggregates v Commission, not yet reported, para 114.

49 Ibid, paras 114–116.

50 The same issue was at the centre of the Ladbroke Racing judgments: Case T–67/94, Ladbroke Racing v Commission [1998] ECR II–1, Case C–83/98 P, France and Ladbroke Racing v Commission [2000] ECR I–3271. The CFI first asked ‘ whether the Commission was correct in maintaining that the tax regime applicable to the horse-racing sector does not constitute in itself a derogation from the general tax system, but a special system intended to apply solely to that sector’ (para 75). However, ‘the mere fact that that measure belongs to a separate system, and does not fall within the derogations from the general fiscal arrangements, does not remove it from the ambit of Article 92(1) of the Treaty’ (para 77). The decision was upheld by the ECJ.

51 NN ‘Anmerkung zum Fall C–143/99, Adria-Wien Pipeline’ [2002] EuZW 213, 216.

52 However, the Commission notice on direct business taxation, above n 13, para 14, points out that the mere fact that some firms or sectors benefit more from tax measures than others does not mean that these measures are automatically caught by the state aid rules.

53 Commission notice on direct business taxation, above n 13, para 15.

54 Commission Decision 2005/566, OJ 2005 L 190/13, para 49.

55 Case C–143/99, Adria-Wien Pipeline v Landesfinanzdirektion Kärnten [2001] ECR I–8365.

56 Case C–75/97, Belgium v Commission [1999] ECR I–3671, para 32; Case C–172/03, Heiser v Finanzamt Insbruck [2005] ECR I–1627, para 42.

57 Case C–409/00, Spain v Commission [2003] ECR I–1487, para 49.

58 Commission Decision 2003/883/EC, OJ 2003 L 330/23.

59 Joined Cases T–92 and 103/00, Diputation Foral de Alava [2002] ECR II–1385, paras 37 and 38.

60 Ibid, para 49.

61 EFTA Surveillance Authority, Invitation to submit comments, OJ 2004 C 319/17, 27.

62 Case C–143/99, Adria-Wien Pipeline v Landesfinanzdirektion Kärnten [2001] ECR I–8365, paras 8, 36 and 49–54.

63 Joined Cases C–393/04 and 41/05, Air Liquide v Seraing and Liege [2006] ECR I–5293, para 31. Further examples can be found in the European Commission Report on the implementation of the Commission notice on the application of the state aid rules to measures relating to direct business application of 9 Feb 2004, COM(2004)434, paras 25–33.

64 Case 173/73, Italy v Commission [1974] ECR 709.

65 Joined Cases T–92 and 103/00, Diputation Foral de Alava v Commission [2002] ECR II–1385, para 60.

66 See Arhold, C ‘The Case Law of the European Court of Justice and the Court of First Instance on State Aids in 2005/2006’ [2006] EStAL (Eurpoean State Aid Law Quarterly) 215, 226.

67 Commission decision 2002/540/EC, OJ 2002 L 174/31, para 72.

68 Case C–88/03, Portugal v Commission, not yet reported, para 81.

69 Case C–409/00, Spain v Commission [2003] ECR I–1487, para 46.

70 See above n 46 above and accompanying text.

71 The aim to increase taxes was onsidered as a justification in Joined Cases T–92 and 103/00, Diputation Foral de Alava v Commission [2002] ECR II–1385, para 60, but in these cases the alleged objective to promote investement and thereby to increase tax revenues was not supported by the facts, as the Court stated: ‘hard to reconcile with the granting of tax exemptions.’

72 Ibid, para 60.

73 Case C–88/03, Portugal v Commission, not yet reported, para 82.

74 Commission notice on direct business taxation, above n 13, para 23.

75 Case T–210/02, British Aggregates v Commission, not yet reported.

76 European Commission, ‘Report on the implementation of the Commission notice on the applciation of the state aid rules to measures relating to direct business taxation’, 9 Feb 2004, para 36.

77 Joined Cases C–128 and 129/03, AEM and AEM Torino v Autorità per l’energia elettrica e per il gas [2005] ECR I–2861, paras 39–43. See Maier, M and Werner, P ‘ Review of Judgement AEM SpA v Autorita per l´Energia Elettrica e per il Gas‘ [2005] EStAL 657.

78 Case C–308/01, Gil Insurance and others v Commissioners of Customs & Excise [2004] ECR I–4777, paras 74–78.

79 See the examples in the preceeding paragraphs.

80 Case C–75/97, Belgium v Commission [1999] ECR I–3671, para 38.

81 Case C–409/00, Spain v Commission [2003] ECR I–1487, paras 53 and 54.

82 Commission, Decision 2002/540/EC, OJ 2002 L 174/31,para 72.

83 Case C–172/03, Heiser v Finanzamt Insbruck [2005] ECR I–1627, paras 46 and 47.

84 Case C–409/00, Spain v Commission [2003] ECR I–1487, para 53 and 54.; Case T–210/02, British Aggregates v Commission, not yet reported, para. 106.

85 Case C–351/98, Spain v Commission [2002[ ECR I–8031.

86 Jestaedt, T, above n 4, 163; Maier, M and Werner, P, above n 77.

87 Case C–143/99, Adria-Wien Pipeline v Landesfinanzdirektion Kärnten [2001] ECR I–8365.

88 Commission notice on direct business taxation, above n 13, para 13.

89 See, eg, Case C–172/03, Heiser v Finanzamt Innsbruck [2005] ECR I–1627, concering the application of a VAT exemption to dentists. The Court’s approach has been criticised as too wide by d’Ormesson, O and Bouin, A ‘Review of ECJ Judgment in Case C 172/03—Wolfgang Heiser v Finanzamt Innsbruck, 3 March 2005’ [2005] EStAL 335.

90 Joined Cases C–186 and 188/02 P, Ramondin and others v Commission [2004] ECR I–10653, paras 77 and 78.

91 Cases C–393/04 and 41/05, Air Liquide v Seraing and Liege [2006] ECR I–5293, para 34.

92 Case 102/87, France v Commission [1988] ECR 4067.

93 See Commission notice on direct business taxation, above n 13, para 11.

94 Jestaedt, T, Derenne, J and Ottervanger, T, above n 2, 33.

95 See Köster, T ‘Recovery of unlawful State aid’ in Sanchez Rydelski, M (ed), above n 8, 653.

96 Jestaedt, T, Derenne, J and Ottervanger, T, above n 2, 33.

97 Case C–183/91, Commission v Greece [1993] ECR I–3131, para 16.

98 Case C–390/98 Banks v The Coal Authority [2001] ECR I–6117, para 80.

99 Joined Cases C–393/04 and 41/05, Air Liquide v Seraing and Liege [2006] ECR I–5293, para 48.

100 Ibid, para 43.

101 Ibid, para 45.

102 AG Tizzano, Opinion in ibid, para. 75.

103 Joined Cases C–261/01 and 262/02, Belgium v Van Calster and others [2003] ECR I–12249, para 44.

104 See the critical assessment of the decision in Geburtig, L-J ‘Die Abgabenerhebung im Visier des europäischen Beihilferechts— eine kritische Anmerkung zur van CalsterRechtsprechung des EuGH’ [2002] EuZW 716.

105 Joined Cases C–261/01 and 262/02, Belgium v Van Calster and others [2003] ECR I–12249, para 49.

106 Ibid, para 54.

107 Joined Cases C–34 to 38/01, Enirisorse v Ministero delle Finanze [2003] ECR I–14243.

108 Ibid, para 45.

109 Case C–345/02, Pearle and others v Hoofdbedrijfschap Ambachten [2004] ECR I–7139, para 29.

110 Case C–174/02, Streekgewest v Staatssecretaris van Financieen [2004] ECR I–85, para 25.

111 Ibid, para 26.

112 Ibid, para 28.

113 Case C–175/02, Pape v Minister van Landbouw [2005] ECR I–127, paras 14 and 15.

114 Joined Cases C–128 and 129/03, AEM and AEM Torino v Autorità per l’energia elettrica e per il gas [2005] ECR I–2861.

115 Joined Cases C–266 to 270 and 321 to 325/04, Casino France and others v Caisse Nationale d’Assurance de Viellesse (Organic) [2005] ECR I–9481, para 34.

116 Ibid, para 42.

117 Joined Cases C–393/04 and 41/05 Air Liquide v Seraing and Liege [2006] ECR I–5293, para 46.

118 Case C–526/04, Laboratoirs Boiron v Urssaf and ACOSS, not yet reported.

119 Ibid, para 31.

120 Ibid, para 33.

121 Ibid, para 34.

122 Ibid, para 35.

123 Ibid, para 37.

124 Ibid, para 39.

125 Ibid, para 41.

126 AG Tizzano, Opinion in ibid, para 47.