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

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

Rita Szudoczky, Balázs Károlyi

European State Aid Law Quarterly, Volume 19 (2020), Issue 3, Page 251 - 270

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.


Multi-rate Turnover Taxes and State Aid journal article

A Prelude to Taxes on Company Size?

Phedon Nicolaides

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 226 - 238

In order to determine whether a tax measure is selective, it is necessary to determine first the reference tax system. The General Court has recently ruled that the reference system is that which is defined by Member States and includes such components as the tax base, the tax rates, and the various bands of taxable income, profit, or revenue. The Commission may not identify a hypothetical or artificial reference system. The General Court has also ruled that differentiation of tax payers is not necessarily selective as long as it follows from the objective of the system and that the progressivity of tax rates is a form of differentiation that is not necessarily selective. In this connection, progressive tax rates on profit can be justified according to the ability to pay. This article argues, however, that progressive taxes on turnover are unlikely to correspond to ability to pay. It also warns that Member States may be tempted to target company size under the pretext of levying progressive taxation. Keywords: State aid; Turnover; Taxation; Progressive rates; Selectivity

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