Title: The Creeping Juridification of the Code of Conduct for Business Taxation: How EU Codes of Conduct Become Hard Law
Abstract: Behind the discussion about ‘soft law before (European) courts’ there is a deeper question: what does the reference to soft law by courts mean for the very nature of the referred instrument? In this article, I focus on this underlying question by means of offering a theoretical framework that provides criteria for the process of the transformation from soft into hard law, a process referred to as juridification.1 On this basis, it is shown that the courts play a crucial role in this process when they make use of soft law, but they do not remain the only relevant actors. It is the interaction between political and legal actors, ie the practices of the (political) authors of the soft law instrument and the reference to soft law by the courts that is capable of transforming soft law into hard law. This proposed theoretical framework on the juridification of soft law is developed with a view to a particular type of EU soft law instrument: codes of conduct that are used in different policy fields as an integral part of new forms of governance and of the better regulation agenda.2 To that end, according to criteria developed in the literature on legalization of international relations3 and on the juridification of codes of conduct,4 codes of conduct can, under certain conditions, be regarded as having gradually transformed into legally binding obligations. In order to show this transformative process in action, this article will discuss a specific code of conduct that has been agreed upon by the Member States to address the problem of tax competition in relation to business taxation. This code of conduct is a particularly interesting one to examine because it deals with the controversy that surrounds the relation between the fairness and the legality of tax competition to attract foreign businesses within the EU. As a general rule, it is accepted that EU Member States are not allowed under Article 107 TFEU to grant State aid in the form of selective tax advantages to attract (foreign) businesses.5 However, the EU Treaties do not proscribe Member States granting tax advantages in the form of a low general level of taxation in order to attract foreign businesses, although such measures may not always be viewed as fair. The line between fair and unfair tax competition is precisely drawn through the so-called Code of Conduct for Business Taxation (hereinafter the Code).6 This Code has been developed by the Council of Economics and Finance Ministers (ECOFIN) in 1997 and it lays down principles that aim to prevent unfair tax competition in the EU. The Member States and the Commission understood it as a political commitment without legally binding force that should complement the legal rules on state aid,7 a view that is widely shared in the literature.8 Contrary to this prevailing opinion, this paper argues, on the basis of the theoretical framework on juridification, that the Code has steadily and gradually transformed into a document with the characteristics of a hard law.9 Hence, it has transformed expectations as to the fairness of tax competition into legal obligations for the Member States when developing their taxation schemes.
Publication Year: 2018
Publication Date: 2018-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 3
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