Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Digital Service Taxes and State aid: Chillin’ in the media

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Arc

Online platforms are all over the news these days. Today we have learnt that the European Commission has opened a formal probe into Amazon’s practices. I could write a post, but I have the sense that the one I prepared on the preliminary investigation a while ago still captures well my thoughts on the case.

I would simply add a question for discussion: is the data supplied to Amazon by merchants not just an element of the cost of doing business via the marketplace (i.e. part of the price they pay to access the platform)? If so: is this aspect of the case not simply about alleged excessive pricing (with all the consequences and implications that follow)?

More to the point of today’s post, large tech companies have made the headlines on both sides of the Atlantic following the French Senate’s green light to the so-called Digital Services Tax (which, it seems, is known as ‘taxe Gafa’ in France).

I have been asked to share my views on the State aid dimension of this tax (a topic that Alfonso covered on the blog). Last week I was interviewed by Bloomberg Tax (see here), together with Alfonso’s partner José Luis Buendía Sierra.

On Monday of this week, I took part in a radio programme (Knowledge@Wharton), run by The Wharton School at Penn and offered via SiriusXM Radio. I was interviewed together with Ruth Mason (University of Virginia) and Andrea Matwyshyn (Penn State). It was fascinating, no less because this case has sparked an academic interest in EU State Aid Law in the US. You can access the interview here.

What are my views on the State aid dimension of the Digital Service Tax (or ‘taxe Gafa’)? From a substantive perspective, I believe it is difficult to argue that this tax is not vulnerable to challenge on State aid grounds.

If one pays attention to recent administrative practice, the most reasonable conclusion is that it is more likely than not that the Commission would conclude that it is caught by Article 107(1) TFEU. In this sense, the French Senate’s position, which insisted on the notification of the measure, comes across as sensible and prudent (and in the spirit of Articles 107 and 108 TFEU).

Does it mean that the measure is necessarily State aid? No. Even though it appears to be explicitly targeted at some firms (it is known as ‘taxe Gafa’ for a reason), one could try and make the argument that the targets are not in a comparable factual and legal situation as everybody else.

Perhaps. But there is, at present, no operational test to determine whether undertakings are in a comparable factual and legal situation. This is one of the fundamental issues I emphasised in my presentation at our State aid workshop a month ago. I struggle to see why and when two groups of undertakings are likely to be deemed in a comparable situation, and when they are not.

Against this background, my sense is that it would be desirable to get some guidance from the Court on this point. And perhaps this case (together with the pending disputes on the Polish Retail Tax and the Hungarian Advertising Tax) provide the ideal context to do so.

Written by Pablo Ibanez Colomo

17 July 2019 at 6:46 pm

Posted in Uncategorized

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