Justice, Equality and Tax Law

S. 3041. Introduction

The question posed in this paper is whether the prohibition of a state aid instrument as provided in Article 107 of the treaty on the functioning of the European Union (TFEU) is an effective instrument against unfair tax competition within the European Union (EU). In order to evaluate this, section 2. will discuss the concepts of harmful and unfair tax competition. Section 3. will discuss the prohibition of state aid instrument and how it is used in tax cases. Finally, in section 4., a synthesis is made in order to better understand how the prohibition of state aid can be an effective instrument against unfair tax competition.

2. Harmful and Unfair Tax Competition

2.1. Overview

To understand the issues around tax competition, firstly, will require a definition of the concept of “tax competition”. Secondly, the term harmful tax competition must be conceptualized. The term harmful tax competition is often used by politicians, institutions and international organizations, including the EU, who usually define harmful tax competition by delineating between acceptable and harmful tax competition. This paper will follow the descriptive approach to define harmful tax competition: wha...