Turnover-Based Taxes in EU State Aid Control: The ‘Hypothecation Test’ and Its Relationship With Free Movement

Abstract

The turnover-based taxes imposed by Hungary on Vodafone, Tesco and Google are found not to be State aid by the CJEU. Indeed, the Court states that a taxpayer cannot rely on the argument that the exemption enjoyed by other taxpayers constitutes State aid, in order not to pay a tax. Nevertheless, instead of relying on the criteria enshrined in Article 107 TFEU, in order to constitutes State aid the relevant test to pass is whether a tax is directly hypothecated to an aid measure. Furthermore, the three judgments touch upon the relationship between State aid control and the free movement provisions. Although the issue is not openly addressed by the Court, the two sets of rules are analyzed concurrently rather than alternatively. As for the analysis on the free movement, the Court finds that the establishment of a steeply progressive tax does not discriminate per se between home companies and the ones established abroad and thus the Hungarian law complies with EU law.