CAN A TAX (RATHER THAN A TAX EXEMPTION) CONFER A SELECTIVE ADVANTAGE?* Introduction A tax exemption normally confers a selective advantage, unless it is justified by the logic of the tax. Counterintuitively, a tax itself can be selectively advantageous if its scope is too narrow. As the series of judgments in the British Aggregates saga have taught us, a tax that does not apply to all competing products tilts the level of competition in favour of those products that are untaxed. Identifying possible advantage in tax measures is a benchmarking or comparative exercise. In the case of tax exemptions, the tax itself is the benchmark. But when the tax simply has an excessively narrow scope, the benchmark is invisible. It has to be constructed by examining competitive relationships in
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The EU Court of Justice provides a preliminary ruling relating to a dispute between several electricity and hydroelectricity producers concerning a tax on the use of inland waters for the production of electricity (UNESA)
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