The European Parliament is currently holding hearings with European Commission (Commission) President-Elect Jean-Claude Juncker’s commissioners-designate.  Among those being questioned is Margrethe Vestager, the Danish official who has been tagged to be the new Competition Commissioner. 

In President-Elect Juncker’s mission letter to Vestager, he instructs the Commissioner-Designate for Competition to inter alia “mobili[ze] competition policy tools and market expertise so that they contribute [to…] the fight against tax evasion.”  DG COMP’s State Aid arm already has a Task Force on Tax Planning Practices that is looking at tax ruling practices in a number of member states.  The practices of Ireland, the Netherlands, and Luxembourg are clearly under review as evidenced by the fact that DG COMP has opened formal investigations into their tax rulings for Apple (SA.38373), Starbucks (SA.38374), and Fiat (SA.38375), respectively.  However, various sources also mention Belgium, Cyprus, Gibraltar, Malta, and the UK as likely future candidates for investigation. 

In each investigation, in order to determine whether the tax ruling is state aid, the Commission looks at whether: (i) the tax ruling conferred an advantage on the addressee; (ii) the advantage was selective; and (iii) the tax ruling distorts/threatens to distort competition and has the potential to affect trade between member states.  If the answer to each of these is yes, then it is state aid.  At that point, the Commission must determine whether the state aid is compatible with the EU’s internal market.  State aid is considered compatible with the internal market on the basis of the exceptions listed in Article 107(2) and (3) TFEU.  If the state aid, in these investigations, taxes that the national authorities would have otherwise collected, is not compatible with the internal market the recipients will ultimately need to pay the taxes that they would have been liable for but for the preferential treatment.

It is likely that other member states will be in correspondence with DG COMP in the near future.  As further review occurs at the EU level, we would imagine that member states’ national authorities (both in investigated member states and otherwise) would also begin to quietly review existing tax rulings in order to ensure that they do not appear to be doing anything untoward.