Company taxation, state aid and fundamental freedoms: is the next step enhanced co-operation?

Abstract:

In recent years the European Court of Justice has, with increasing frequency, ruled that national taxation laws are incompatible with fundamental freedoms protected by the EC Treaty. The Commission has also focused its state aid review more intensively on direct tax incentives to business. This article reviews the current state of evolution of these two aspects of negative European tax law integration, showing how the principles of free movement and fair competition have combined to limit significantly the fiscal sovereignty of the Member States, but without easing the tax compliance burden on businesses with operations in more than one Member State. With the Constitutional Treaty confirming the requirement of unanimity for fiscal harmonisation measures, the enhanced co-operation process has been proposed as the best chance for further alignment of Member State tax laws, and specifically harmonisation of the corporate tax base.