Chicago Journal of International Law

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International headlines have been consumed with the proliferation of international tax havens and “sweetheart deals” given to multinational companies with the hopes that they would invest in a given country. In response to such concerns, the E.U. Commission has issued a spate of decisions in which it concludes that certain taxation rulings given by State Members to international corporations constitute illegal state aid. These decisions have both befuddled and outraged various parties in the international community, including states and multinational corporations, who claim that the Commission is acting both unilaterally and without precedent. This Comment surveys the applicable case law and analyzes in detail the rationale behind the Commission’s decisions in order to uncover some of the fundamental principles driving the E.U.’s executive body. This Comment reaches a number of conclusions. One, “selectivity” and “advantage” applied by the Commission in determining the existence of state aid is a purposeful conflation by the Commission rather than a brash departure from earlier precedent. The Commission’s rulings also reveal the importance of both the reference system and the use of treaties in purposefully framing any tax rulings that a multinational may receive. Finally, the use of generalized and individualized schemes will have vastly different consequences, given that these two groups of measures are analyzed very differently by the Commission. Case law will also reveal significant flaws in the Commission’s decisions, including the fact that the Commission has applied these terms inconsistently. Additionally, the Commission retains significant power to rule arguendo that a measure has the potential to distort competition and affect intra-state trade. The preceding considerations are important, as they ultimately affect the ex ante planning considerations of the multinationals and states involved. In the era of higher, more rigorous tax scrutiny, multinational corporations and Member States must be more purposeful and vigilant in planning.

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