Europe’s political state aid control

The defeat in court should give EU Commissioner Vestager food for thought. But that doesn’t seem to be the case.

Delivering, delivering and delivering: Amazon earns more money even in the pandemic.

SEU Competition Commissioner Margrethe Vestager fell on the nose again in court. In its Amazon ruling on Wednesday, the responsible EU court (EuG) once again confirmed that the European Commission had serious legal errors in a tax aid case. In other cases, too, the judges have completely cashed in on Brussels aid rulings on so-called tax rulings. The Apple ruling of July 2020 is particularly remembered. At that time, too, the court attested to the commission that it had assessed the facts completely incorrectly.

At that time it was about the record amount of 14.3 billion euros, which Ireland now does not have to reclaim from Apple. In the Amazon case, the online retailer does not have to repay “only” 250 million euros to Luxembourg. But the legal assessment is very similar. Again, the court did not criticize a few details, but instead declared the decision completely null and void. Therefore the legal damage to Vestager has increased again. The question now more than ever is whether the EU Commission can take further action against the suspected tax avoidance of international corporations with state aid law.

The competition authority came up with this idea back in 2013 under Vestager’s predecessor Joaquín Almunia. She had discovered that individual member states were actively helping international corporations – through tax rulings tailored to them – to avoid taxes. Only the finding that these tax privileges favor individual companies over others allows the Commission to intervene: It could be illegal state aid. Since then, the Commission’s decisions, which condemned individual member states to reclaim tax advantages, have only proven to be legally valid in about half of them. Legal certainty cannot be established in this way.

It was about facts

Vestager doesn’t seem to care. She responded to the Amazon judgment with the same phrases as in the Apple case. All companies would have to pay their “fair tax share”, and tax advantages for international corporations deprive EU citizens of the funds for “urgently needed investments to overcome the corona crisis” and for the green and digital transformation. These beautiful goals were not up for trial in court. It was about facts and their legal assessment.

With the latest ruling, not only the pursuit of “tax deals” through state aid control finally reaches its limits. It is unclear whether this goal can be achieved with a global minimum tax for companies, as is currently being discussed in the OECD framework. That will depend on their design. It is also questionable how the EU Commission intends to set up state aid controls in principle. Vestager’s comments highlight how far this instrument has been politicized and deviated from its real purpose – to protect against anti-competitive subsidies.

It fits in with the overall picture that the CFI also conceded other aid decisions that did not fall under tax law. State aid control has itself become political. Where the Commission takes very strict action against some Member States with regard to tax rulings, it is extremely generous in other policy areas. The state aid to corona is certainly an extreme case; To override the state aid rules for them was probably inevitable. It is doubtful whether pandemic-related subsidies can now be distinguished from routine subsidies that can hardly be justified.

Just one example: In the past few months, the Commission has approved aid from the Italian state on several occasions for Alitalia, which has been apparently dead for years, and which it justified with the pandemic. The Alitalia case, which was ready for decision long before the crisis, is still in the air.

Another example is the subsidies generously approved by the Commission (including Germany) for a battery alliance: If the states spend money on lofty EU goals – the keywords are always “green” and “digital” – the competition authority does not oppose it.

Perhaps that is unavoidable in an EU Commission that is now allowed to incur debts for its development fund itself and distribute the funds from it for the lofty goals itself. In addition, Vestager has not only been competition commissioner since 2019, but has also taken on the much more political role of Vice President for Digital. This dual task has blurred her profile. It harmed the competition.