Band Aid Solution

European Court clarifies EU Commission's powers to police member states' taxation policies under state aid rules

In major state aid news, the General Court, the first instance tribunal of the European Court of Justice issued two judgments on 24th September 2019 which dealt with the power and competence of the European Commission to rule on member state's tax policies. It clarified the circumstances in which transfer pricing arrangements agreed between multi-nationals and the host member state could amount to unlawful state aid in breach of Article 107 of the Treaty for the Functioning of the European Union (TFEU). The consequence of these rulings is that the Commission is likely to increase its state aid enforcement actions against aggressive tax avoidance schemes in the EU.