Just Tax It? - The Reference Framework in EU State Aid Tax Rulings and the Fate of Nike

Sammanfattning

During the last decade, the European Commission has launched state aid investigations into tax arrangements between several EU member states and large multinational corporations. In many of these investigations, the Commission argued that state aid was present because the national tax agencies endorsed transfer pricing practices that were not compliant with the arm’s length principle. While this argument was generally accepted upon appeal to the General Court, the ECJ did not agree. In fact, the ECJ ruled in its landmark ruling in Fiat that the Commission may not rely on the arm’s length principle unless expressly adopted into national law. Despite this, Apple was decided in favour of the Commission even though the arm’s length principle was not adopted into Irish law at the time of the contested tax rulings. Although Apple marked a significant win for the Commission, the outcome was largely due to procedural circumstances. Due to a lack of cross appeal from the Apple subsidiaries and Ireland, the ECJ accepted the Commission’s definition of the reference framework and subsequent selectivity analysis. Hence, Apple did not change the precedents developed through previous jurisprudence. Due to the remaining fiscal autonomy within taxation, non-compliance with the arm’s length principle cannot give rise to state aid unless the principle is incorporated in national law. At the time of writing, several state aid investigations into tax arrangements remain open. This thesis focuses on the open state aid investigation into advanced pricing agreements concluded between Nike and the Dutch tax agency. Against the backdrop of previous case law, it seems that the finding of an advantage will be the most contentious point of law in Nike. This is primarily because the ALP is adopted into Dutch law, which likely makes the determination of the reference framework less controversial. Although the Commission could be successful in Nike, it is unlikely that it will continue to launch large state aid investigations into similar tax arrangements in the future. The previous case law has shown that the chance of success is highly dependent on the adoption of the arm’s length principle in national law and the subsequent interpretation of said law. Ultimately, the fiscal autonomy of the EU member states hinders full state aid control in the area of taxation. Hence, there may be other international instruments and initiatives, such as the BEPS project, that are better suited to dealing with tax evasion of large multinational corporate groups.