WTO Subsidies and EC State Aid Provisions Sample Clauses

WTO Subsidies and EC State Aid Provisions. The EC state aid provisions are stated in the EC Treaty section 2. (1) EC states, that »…any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market«. From the wording of Art 87 (1) EC, it can be concluded that the provision can be applied to aid granted »in any form whatsoever«, i.e. a direct tax measure can in principle be in contradiction with the provision. In this respect is should be noticed that on December 10, 1998, the European Commission published the »Notice on the application of the State-aid rules to measures relating to direct business taxation«9. Notwithstanding the fact that the notice from the European Commission does not have the status as primary law (and therefore only gives an informal interpretation of Art 87 EC), its conclusion should be noticed. In paragraph 8-12, the European Commission identifies four cumulative criteria to identify State Aid contained in national tax meas- ures: 1. the measure must confer on recipients an advantage which relieves them of charges that are normally borne from their budgets, 2. the advantage must be granted by the State or through State resources. For example, the Commission mentions that a loss of tax revenue is equivalent to consumption of State resources in the form of fiscal ex- penditure, 3. the measure must affect competition and trade between Member States, i.e. state aid is not in general abolished, 4. the measure must be specific or selective in that it favours »certain un- dertakings or the production of certain goods«, cf. Art. 87(1) EC. However, due to the European Commission, a distinction must be made be- tween state aid measures and general measures. Provided that a measure can be applied without distinction to all firms and to the production of all goods, the following tax measures do not constitute State aid: 1. Tax measures of a purely technical nature10 2. Measures pursuing general economic policy objectives through a re- duction of the tax burden related to certain production costs11 9 See OJ December 10, 1998 C 384/3 and IP/98/983. 10 For instance: Setting the rate of taxation, depreciation rules and rules on loss carry-overs, provisions to prevent double taxation or tax avoidance etc.‌ Finally, it should be noticed that when comparing subs...