Prohibited selectivity of business tax measures and tax policy

Abstract

The scope of this article is to describe how state aid control is applied with respect to preferential tax regimes inspired by general tax policy considerations such as the promotion of business activities. One has to necessarily place this exercise in the framework of the perpetual debate about the notion of selectivity in reviewing measures relating to business taxation. The examination of how tax systems are used to artificially support the competitiveness of certain undertakings in a sense prohibited by Article 107(1) TFUE, generally results into the tax measure being declared incompatible with the internal market. Indeed according to the settled case law of the Court, any aid granted by a Member State, in any form whatsoever, which distorts or threatens to distort competition by favouring certain undertakings or productions, in so far as it affects trade between Member States is in principle incompatible with the internal market, subject to certain limited exceptions. Under which conditions certain discretional tax policy practices are selective, rather than general measures, is the fundamental question of fiscal aid control.