In a recent Advocate General decision, it was found that a lower corporate tax rate and other incentives provided by Basque Historical Territories did not constitute incompatible State Aid.

On 8 May 2008, Advocate General Juliane Kokott of the European Court of Justice (ECJ) gave her opinion in the case of Unión General de Trabajadores de La Rioja v. Juntas Generales del Territorio Histórico de Vizcaya y otros (joined cases C-428/06, C-429/06, C-430/06, C-431/06, C-432/06, C-433/06 and C-434/06).

In this case, the Advocate General concluded that art. 87(1) of the EC Treaty shall be interpreted as meaning that the tax measures adopted by an infra-State body, applicable to all enterprises within its fiscal jurisdiction, do not favour certain undertakings or the production of certain goods if that infra-State body enjoys sufficient autonomy to exercise its legislative powers in tax matters. Such autonomy implies that:

• the infra-State body has institutional autonomy;
• the central government does not have any possibility to intervene decisively in the procedures for the adoption of territorial tax laws (formal constitutive autonomy);
• the infra-State body enjoys sufficient autonomous powers to enact fiscal regulations, in order to pursue its own economic policy objectives (material constitutive autonomy); and
• the economic consequences of the reduction in the tax revenues resulting from the more favourable regulations are borne by the infra-State body (economic autonomy).

A more substantial report containing details of the Advocate General's reasoning will be published subsequently.