Can selectivity result from the application of non-selective rules? The case of Engie

This paper identifies a significant shift in the approach for determining whether a tax measure is selective. The European Commission, in its decisions on tax rulings, has found that the selective nature of the rulings stemmed from the fact that they endorsed arrangements whose terms deviated from those that would have been agreed under normal conditions of competition. Unlike its other decisions on tax rulings, the Commission in the Engie case does not examine whether Engie benefitted from treatment that was not available to other companies. Instead, the Commission bases its finding of selectivity on the fact that Engie minimized its tax liability. This is an ‘outcome-based’ approached rather than a ‘treatment-based’ approach which requires comparison between companies in similar situations. Without a benchmark of comparison, an outcome-based approach ismeaningless. In addition, the Commission breaks new ground by finding a selective advantage in favour of Engie in the nonenforcement by Luxembourg of anti-abuse rules. The Commission asserts that Luxembourg should have refused to issue the tax ruling.