Tax rulings, state aid and the rule of law

Abstract

In 2013, the European Commission started investigating the compatibility of tax rulings granted to multinational companies by their domestic tax administrations with EU State aid law. So far, the Commission has found State aid to be present in nearly each case it has been investigating. The investigations have resulted in a situation where the principle of equal treatment and non-discrimination (pursued by the State aid rules) and the principle of legal certainty (which underlies the instrument of a tax ruling) come into conflict. This chapter evaluates the European Commission's State aid investigations from the perspective of the Rule of Law, which embodies the core values of equality and legal certainty. The chapter concludes that a system of fair taxation, which the European Commission seeks to establish, cannot be achieved if the fundamental elements of the Rule of Law, such as legal certainty and predictability, are at risk. State aid rules should not be used to remedy shortcomings in the tax legislation or administration of the Member States and to scrutinize binding decisions of national tax authorities.