Defining the Scope of State Aid : How Tax Cases Affect the State Aid Framework

As the European Court of Justice rightly pointed out in the 1960’s, it makes little sense regulate national governments' provision of traditional subsidies to companies while leaving the option to grant financial benefits by other means unrestricted, for instance via the tax system. So, in essence, the European Union's state aid framework does apply to a broad range of government benefits. This working paper is based on a lecture given at a conference of EU (non-tax) lawyers so it will not address the many cases and complexities that arise in interpreting state aid rules when confronted with taxes. What it will do is point out how some of the peculiarities in decisions and judgements concerning fiscal aid may affect the state aid regime in general. For this purpose I have selected some issues that will be briefly addressed: (i) the treatment of indirect aid, and in particular the discrepancy that may exist between the financial advantage enjoyed by an aid recipient and the amount of resources given up by the state; (ii) the attribution of state aid to governments in light of compliance with EU directives; (iii), the renewed General Block Exemption Regulation and the procedural nightmare it may become for diligent taxpayers, (iv) ex-officio references to the ECJ by national judges in the context of them being asked to rule on the awarding of subsidies or tax benefits in domestic proceedings, (v) analytical versus synthetic taxation and its place within the general state aid framework, with a focus on royalties and (vi) the treatment of public enterprises as profit-pursuing market participants, when they are not involved in services of general economic interest (SGEIs)