The Gibraltar Judgment and the Point on Selectivity in Fiscal Aids

Abstract: A recent judgment of the Court of First Instance (CFI) provided the latest interpretation of the controversial notion of selectivity with respect to state–aid review of business tax measures pursuant to Article 87(1) of the European Community Treaty.

Taxation was not the initial focus of the state–aid restrictions, but the European judicature made it clear in some early judgments that the restriction applies to all forms of public aid including all kinds of relief from taxation normally imposed and that the restriction does not distinguish between measures of state intervention in respect to their causes or their aims but solely to their effects. However, all tax systems provide exceptions and derogations, and the distinction between legitimate or normal tax differentiations and state aids depends on the interpretation of the national framework concerned with the tax rules under examination, which effectively leaves a broad margin of technical appreciation to the Commission and creates greater practical uncertainties for national authorities and taxpayers alike.

The most important statements or findings of the Court with reference to the two issues relating respectively to the notions of geographic and material selectivity are illustrated, followed by a comprehensive review of the controversial notions of selectivity general measure and justification by the nature and scheme of the tax system, under the case law of the Court and the Commission practice.