ECJ Rules On Irish, French and Italian Excise Duty Exemptions

by Ulrika Lomas, Tax-News.com, Brussels

12 December 2013

The European Court of Justice (ECJ) has ruled that certain excise duty exemptions granted by France, Ireland, and Italy are in breach of European Union (EU) state aid regulations.

The European Commission has been pursuing the issue for eight years. In 2005, it established that French, Irish, and Italian exemptions from excise duty on mineral oils used as fuel for alumina production constituted illegal and largely incompatible state aid.

This decision was then challenged before the EU's General Court, which annulled it. The annulment was granted on the basis that the exemptions at issue were not imputable to member states, but to the EU, as they derived from rules set by the Council of Ministers. For the Court, therefore, the exemption did not represent state aid in the meaning of the EU's own directives. Moreover, the Court argued that the Commission's action called into question the validity of the Council's ability to authorize certain exemptions.

The Commission launched an appeal, but the General Court again rejected the claims. This prompted the Commission to warn that the judgment had implications for its powers under state aid rules, and for the notion of state aid.

The ECJ has now overturned the General Court's ruling. Welcoming the announcement, the Commission said that it confirmed the Commission's exclusive competence in state aid control, along with the objectivity of the concept of state aid. The ECJ also found that a Council decision authorizing a member state, in accordance with an EU directive on taxation to introduce excise exemptions, could not prevent the Commission from exercising the duties conferred on it by EU treaties.

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