Tuesday, January 31, 2017
Fadi Shaheen (Rutgers) presents Treaty Aspects of the McDonald's State Aid Investigation at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John Brooks and Itai Grinberg:
On December 3, 2015, The European Commission decided to initiate an official investigation into whether Luxemburg has selectively granted McDonald’s advantageous tax treatment in breach of EU state aid rules. The Commission’s decision is based on its conclusion that Luxembourg’s treaty-based exemption of the income attributable to the U.S. branch of a McDonald’s Luxembourgian subsidiary is contrary to the Luxembourg-U.S. treaty because that income was not taxable in the United States. This paper demonstrates that while the Commission’s conclusion and recourse to conflicts of qualification principles are correct, both the Commission’s reasoning on the one hand and Luxembourg’s and McDonald’s position on the other hand misapply the treaty.
The paper also points out that the Commission could base its conclusion on an underappreciated yet clear and straightforward treaty language without recourse to the conflicts of qualification principles.