Spanish Tax Credit for Investments in Environmental Protection: An Example of a Tax Incentive Compatible with EU Rules on State Aid
15 Pages Posted: 9 Feb 2015
Environmental matters are at the heart of European Union policy, and are also firmly entrenched in the Constitutions of several Member States. In this context, legal instruments, including tax legislation (tax incentives), have become a tool used to foster the protection of the environment. However, taking into account their effects on business decisions, tax incentives must be designed in a way that they do not constitute State aid prohibited by Article 107 of the TFEU.
This paper explores Spanish tax credit for the investments in environmental protection in the light of EU rules on State aid. The study of this tax credit represents a perfect opportunity to reflect on the following: the legal foundations of environmental tax incentives (taking into consideration the interplay between the ability-to-pay principle and the goal of environmental protection, as well as the polluter pays principle); the limitations imposed by EU State aid rules to Member States in the use of such incentives; and the need for Spanish national legislative authorities to improve and develop tax legislation related to environmental matters if they aim to undertake a genuine "Green Tax Reform".
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