ABSTRACT

Aid measures which favour ‘certain undertakings or the production of certain goods’ are incompatible with the Common Market under Art 87(1). In order to satisfy the selectivity criteria one needs to distinguish between general economic policy measures and those economic policy measures which exclusively benefit, directly or indirectly, certain industries.22 State aid would not normally extend to general measures of economic policy, such as taxation or other fiscal measures.23 Tax exemptions have consistently been treated as State aid by the Commission24 and reductions in the rates of taxation applicable to products defined by regional, sectoral or other criteria may constitute aid. The selectivity requirement will generally be satisfied where aid is provided for a particular economic activity, a particular sector, a branch of industrial activity, according to geographical area or to undertakings of a particular nature.25 The English Court of Appeal has confirmed that a differential level of taxation can constitute State aid.26 Case law indicates that it is becoming more difficult for a Member State to argue that a measure is general rather than selective. It has been held that measures that are universally applicable may constitute State aid where discretion exists in the means of their application.27 The selectivity issue has become more problematic due to the increasing complexity of fiscal instruments introduced by Member States, in particular the controversy over whether a tax measure is justified by the nature or general scheme of the system, which was revisited by the Court in the Adria-Wien case.28 The Court held that selectivity will exist and hence State aid will be constituted where similar undertakings in a comparable situation are disproportionately affected by the tax measure and there is no objective justification derived from the general tax scheme.29 The Court has stressed that the logic of the tax scheme must be transparent, clear and coherent otherwise the scheme will fall foul of the selectivity principle; these requirements apply equally to any derogations from a general scheme.30