Impact of taxes on competition: the legal status quo in the European Union | 2015

Author(s) Francisco Alexandre Barbosa Andrade de Portugal
Advisor(s) João Sérgio Ribeiro
Year 2015

Synopsis This thesis shows that taxes are frequently a foe but also an ally of competition. Traditionally, both the legal doctrine and economic theory see taxes as an obstacle to competition. The imposition of a tax affects the supply and demand and therefore interferes with the normal balance of the market. Custom duties and tax aids are basic examples of how taxes can restrict competition. In the European context, the lack of tax coordination in the internal market is another factor that contributes to distort competition considering that it obliges European firms to compete under different rules and involves high compliance costs. These and other situations where taxes affect competition will be analysed in this study. Despite of the obstacles that taxes often represent to competition, the author believes that taxes must also be regarded as an ally to the extent that they can foster competition as well as be used to correct serious market failures, some of the most important purposes of competition policy. That is the case e.g., of taxes that foster competition in monopolistic markets, patent boxes and even environmental taxes. Through these and other examples the author will try to sustain that the negative and the positive effects that taxes have on competition are two sides of the same coin. As taxes are more often a foe than an ally, it is necessary from a competition policy perspective to eradicate the obstacles that taxes create for competition. Therefore in this work the author contributes with a list of recommendations for the EU policymakers, hoping that in the future they will be reflected in European tax law.

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