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Progressive Turnover Taxes under the Prism of the State Aid Rules:

Effective Tools to Tax High Financial Capacity or Inconsistent Tax Design Granting Selective Advantages?

Rita Szudoczky, Balázs Károlyi

DOI https://doi.org/10.21552/estal/2020/3/3

Keywords: turnover, ability to pay, de facto selectivity, digital taxation, sectoral aid, progressive taxation, admissibility, State aid remedy

Turnover-based progressive taxes are increasingly popular among the Member States. However, these taxes raise concerns regarding their compatibility with the EU State aid rules. Although there are multiple State aid concerns that deserve attention depending on the actual design of such taxes, the core issue is whether the ability to pay principle can serve as a legitimate objective underpinning turnover taxes and thus justify the different treatment of high-turnover and low-turnover undertakings. This question requires the careful assessment of de facto selectivity because in the case of progressive turnover taxes potential selectivity could only arise from the general construct of the tax in the absence of a derogation from a reference system. This article proposes an alternative test for the de facto selectivity boiling down in essence to the examination of the consistency of the tax. Furthermore, it analyses digital turnover taxes for their consistency with their declared objectives. Finally, the article explores how the Court’s unnecessarily strict approach to the admissibility of State aid questions in preliminary ruling procedures when the main proceeding concerns an individual tax notice could be eased.

Rita Szudoczky is an Assistant Professor at the Institute for Austrian and International Tax Law of WU (Vienna University of Economics and Business). Balázs Károlyi is a teaching and research associate and a DIBT candidate at the Institute for Austrian and International Tax Law of WU (Vienna University of Economics and Business). For correspondence: <mailto:rita.szudoczky@wu.ac.at> and <mailto:balazs.karolyi@wu.ac.at>.


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