At the International Fiscal Association’s annual congress, Advocate General Kokott weighed in on the European Commission’s State aid cases concerning tax rulings. AG Kokott’s comments suggest that tax authorities, in effect, ought to have a degree of authority about how their national laws ought to apply (the remarks are reported in law360). This echoes an argument of mine in a working paper which I presented at the Oxford Sydney Tax Research Conference in June 2018. The link to the conference website is now broken (a cached version is here) but I am also happy to send a Pdf of the most recent version – just send me an email (stephen.daly@kcl.ac.uk).

In this article I argued that the European Commission’s investigations into tax rulings are predicated on the assumption that misapplications of the law should give rise to State aid concerns. The article argues that this is wrong. Tax authorities, within limits, have the authority to “get it wrong” and this is desirable. EU law should only intervene then where national tax authorities have breach these limits and used their discretion derived from the responsibility to manage compliance improperly, not simply where they have misapplied the law. But therein lies a role for the Commission in checking to ensure that the powers have been used lawfully. The Commission could still succeed in its cases against Ireland, Luxembourg and the Netherlands if it can be demonstrated that the national tax authorities departed from standards governing the exercise of the authority to grant rulings. Moreover, the investigations ultimately demonstrate that there is a lack of confidence that certain tax authorities dispassionately and objectively carry out their functions. The Commission here too should have a role in seeking institutional reform to rectify this problem of trust

Any and all comments are welcome on the paper!