Tax competition and state aid

Abstract

Abstract At the inception of a new and potentially transformative type of tax enforcement, this article reviews the goals underlying the prohibition on state aid, and, in particular, whether those goals properly encompass limitations on tax competition. To explore this question, this article examines treaty text and structure, doctrine, and policy arguments for and against using state aid to curb tax competition. It concludes that the European Commission’s expansion of state-aid doctrine to limit tax competition improperly constrains Member State tax autonomy, arrogates tax policy power to the unelected Commission, and increases legal uncertainty. This article urges the Court of Justice of the European Union to clarify that preventing tax competition is not an independent goal of state-aid enforcement, although limits on tax competition may arise instrumentally via a free-trade interpretation of the prohibition of state aid.