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Selectivity in Corporate Tax Matters After World Duty Free: A Tale of Two Consistencies Revisited

In World Duty Free Group, the CJEU has reaffirmed that de jure-selectivity requires a derogation from the reference system of taxation giving rise to a different treatment of undertakings that are in a legally and factually comparable situation in light of the objective of the reference system. In corporate tax matters, the reference system is generally the corporate tax system itself. It is thus not necessary to identify a certain group of undertakings as the only ones that can benefit from a tax measure. The CJEU’s emphasis on discrimination in the second step of the selectivity test will not effectively restrict the concept of selectivity. By contrast, the CJEU did not address the internal justification where problems persist which respect to permissible grounds of justification, to the relationship between derogation and justification and finally to proportionality. In World Duty Free Group, the CJEU has also confirmed the existence of a second dimension of selectivity, namely de facto-selectivity. While de jureselectivity amounts to an obligation to design Member States’ tax systems in an internally consistent manner, de facto-selectivity can be understood as an example of the obligation also to adhere to certain external consistency standards.