The purpose of this thesis is to examine unfair tax control and tax governance that favours certain types or sizes of companies in light of European state aid law. As a rule, EU-member states have sovereignty on how it collects and governs taxes paid by corporations within its jurisdiction. However, The Treaty on the Functioning of the European Union article 107 actually prohibits EU-member states from giving a selective few companies’ favourable tax treatment, but recently, cases such as the one with Apple and Ireland, have illustrated how complex the law is when deciding if a member state’s tax administrative practices constitute illegal state aid. Given the absence of multilateral laws on direct taxation within Europe, the study is based on the Danish case. The Danish Tax Authorities are responsible for the collection and governance of Danish tax subjects. The focus for any tax authority is not to investigate and audit all its taxpayers, but instead to ensure that taxes are paid in the most efficient manner. Thus, Danish Tax Authorities categorize companies into risk groups and then apply various tools and methods to efficiently collect and govern taxes as according to Danish tax law. However, the analysis finds that they arguably are more focused on smaller and medium sized companies and their audits are sometimes harsher and more thorough. At the same time, the Danish Tax Authorities are found to have a more lenient approach to some larger companies such as through its Tax Governance program. Such tax practice can through state aid law be viewed as a form of selective state aid, but the courts have yet to make a statement on the subject. Member states can in fact justify their approach by reference to the general purpose of the tax system. However, the EU Commission’s state aid case on Gibraltar’s de facto selective tax regime indicates that the European courts could possibly decide against the Danish Tax Authorities and their more lenient approach to some larger companies. The economic analysis finds that the more lenient approach to certain big companies, could arguably be the more rational approach for some member states, since larger companies are more able and likely to move their business to a more favourable tax jurisdiction. Member states are seen as a single rational entity, and they seek to maximize payoffs and benefits that support the state. Thus, member states may want to keep such more favourable companies within the jurisdiction by overlooking company accounts and tax returns, thereby indirectly easing the tax burden of such companies. In return, companies may want to stay in the tax jurisdiction as coordinate its tax payments with state authorities. Thus, the EU-Commission is facing some challenges with the law and the compliance of EU-member states. The Commission may consider supplementing state aid law through directives or treaties, meanwhile they must also respect or adjust the sovereignty rights of member states.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||116|
|Supervisors||Yvette Lind & Henrik Lando|