In 2013, European Commission started investigating whether tax ruling practices of the Member States of the European Union comply with the rules on State aid. Investigation followed public allegations of favourable tax treatment of certain multinational enterprises voiced in the media and in some national Parliaments. Since then, the Commission has adopted negative decisions ordering recovery of illegally granted aid in some highly publicized cases, such as Starbucks, Apple and Amazon. In these decisions the Commission claims that Article 107(1) TFEU requires transfer prices to be determined in accordance with the arm's length principle and that, in assessing tax rulings, the Commission may refer to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. This approach of the Commission encountered strong opposition. Actions for annulment have been brought against the Commission's decisions, the Court of Justice of the EU will therefore have the final word on the correctness of the Commission's argumentation.
In the past, the Commission has already fought against harmful tax competition by using the State aid rules and the Court of Justice of the EU has already confirmed such an approach.
Since tax planning of multinational groups is of a cross-border nature, the rules on State aid, which are focused on the behaviour of individual Member States, cannot cover all aspects of cross-border tax planning, which is based on the exploitation of differences and mismatches between national tax systems. A more appropriate tool for combating tax avoidance of multinational groups is the harmonization of national tax rules and some important projects are being carried out in this area at the EU level. Some of the Commission's legislative proposals have already been adopted, while others are still in the process of adoption.
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