Edoardo Traversa

Allocating Taxing Powers within the European Union

In May 2011, the Max Planck Institute for Tax Law and Public Finance, the Universite Catholique de Louvain and the Tax Institute of the University of Liege convened a conference in the Palais des Academies in Brussels to discuss basic topics of European tax law. Starting from the fact that the judicature of the European Court of Justice regarding the impact of the fundamental freedoms on the tax systems of the Member States is largely built on a non-discrimination approach, renowned experts from all over Europe were invited to present their views on further reaching aspects of the Internal Market and its consequences for the validity of national tax provisions. The overarching goal was to flesh out to what extent a substantive “allocation of taxing powers” within the European Union is on its way to a convincing overall framework. We were happy that many high-level speakers and further participants joined us for two days, sharing their views and proposals for the future development of this area. This book contains enlarged and updated versions of the speeches delivered on that occasion.

The territoriality of tax incentives within the single market

Although in the actual stand of the ECJ case-law, territorial tax incentives adopted by Member States are most likely to be considered as violating the freedoms of movement of the TFEU, as well as the prohibition of State aid, there are strong arguments – as the renewed concept of fiscal cohesion – in favor of a more cautious approach concerning the need under Eu Standards to systematically extend them to cross-borders activities. Having regard to the present division of powers between the EU and its Members States, the latter should not be disproportionately hindered when using taxation in the framework of their social and/or economic policies, in comparison with other policy instruments. Moreover, the analysis of the European treatment of territorial tax incentives shows that the Court should avoid applying simultaneously, whenever possible, EU Treaty freedoms and EU Treaty provisions on State aid. Priority should be given to the analysis of the compatibility under EU freedoms, except if the application of State aid provisions give an added value, for example when it concerns a different aspect of the national scheme brought under the Court’s scrutiny.

Anti-avoidance Measures and State Aid in a Post-BEPS Context: An Attempt at Reconciliation

From an EU law perspective, anti-avoidance measures adopted by Member States have long been subject of scrutiny of the CJEU under EU fundamental freedoms (See also the judgment in Test Claimants in the Thin Cap Group Litigation v Commissioners of Inland Revenue, Case C-524/04, ECLI:EU:C:2007:161, paragraph 25; judgment in Lankhost-Hohorst, C-324/00, ECLI:EU:C:2002:749; judgment in Lasertec, C-492/04, ECLI:EU:C:2007:273; judgment in NV Lammers & Van Cleeff, C-105/07, ECLI:EU:C:2008:24; judgment in Itelcar—Automoveis, C-282/12, ECLI:EU:C:2013:629). This article focuses on the treatment of anti-tax avoidance measures under EU State aid law in the light of current international developments as regards fight against base erosion and profit shifting. Anti-tax avoidance measures indeed often contain rather open-ended notions and entail distinctions based on criteria relating to economic substance, which leads to a wide margin of appreciation by tax authorities. Therefore, they are likely to be caught by the prohibition of State aid. After a brief introduction on the principles guiding the application of State aid rules to fiscal measures, a typology of anti-avoidance measures adopted by the EU and its Member States according to their source, scope and their effects is provided. Then, the article discusses the most significant case-law on the topic, i.e. the Finnish P Oy and German Sanierungsklausel cases and their consequence on the current approach taken by EU institutions in the fight against purely tax driven arrangements. Finally, it proposes interpretative tools to reconcile state aid enforcement with substance-based anti-avoidance measures, in particular as regards the definition of the reference framework, the selection of the main objective of the tax measure at stake and the assessment of the genuine character of economic activities.

What to do with CJEU case law ? The (unexpected) answers of Belgium in the real estate sector following the Temco case

Edoardo Traversa is Professor of Tax Law at the Université catholique de Louvain, and a member of the Brussels bar and Of Counsel at Liedekerke (Brussels), Belgium, edoardo.traversa@ uclouvain.be. Charles-Albert Helleputte is lecturer (Maître de Conférence invité) at the Université catholique de Louvain, and a member of the Brussels bar and Counsel at Mayer Brown, Belgium, chelleputte@mayerbrown.com.