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REGIONAL TERRITORIES AS A REFERENCE FRAMEWORK IN COMPETITION POLICY
By Regional Legislative Decree 2/99/A of 20 January 1999 the Autonomous Region of the Azores approved the scheme for adapting the Portuguese tax system to the specific characteristics of the region, which included reductions in income tax rates of up to 20% in personal tax and up to 30% in corporation tax, all within the regulatory framework established by the Law of 1998 on the Financing of the Autonomous Regions.
The Commission accepted almost all the Decree’s provisions as meeting the conditions for State aid laid down in Article 87(3)(a) of the EC Treaty (aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment). It nevertheless ruled that ‘part of the aid scheme … is incompatible with the common market in so far as it applies to firms that carry on financial activities’. In response, the Portuguese Republic (the governments of the autonomous regions are not entitled to do so) brought an action for the annulment of Commission Decision 2003/442/EC of 11 December 2002 (OJ L 150, p. 52). In its judgment of 6 September 2006, the Luxembourg Court dismissed the action and found the Commission’s decision justified in almost every respect.