ECOFIN – Code of Conduct for Business Taxation

The Code of Conduct for business taxation was set out in the conclusions of the European Council of Economics and Finance Ministers (ECOFIN) of 1 December 1997. The Code is not a legally binding instrument but it clearly does have political force. The Council, when adopting the Code, acknowledged the positive effects of fair competition, which can indeed be beneficial. The Code of Conduct requires Member States to refrain from introducing any new harmful tax measures (“standstill”) and amend any laws or practices that are deemed to be harmful in respect of the principles of the Code (“rollback”). The code covers tax measures (legislative, regulatory and administrative) which have, or may have, a significant impact on the location of business in the Union.1
Goal: The Code was specifically designed to detect only such measures which unduly affect the location of business activity in the Community by being targeted merely at non-residents and by providing them with a more favorable tax treatment than that which is generally available in the Member State concerned. For the purpose of identifying such harmful measures the Code sets out the criteria against which any potentially harmful measures are to be tested.
Relevant Clauses:2
Tax measures covered
A. […] this code of conduct, which covers business taxation, concerns those measures which affect, or may affect, in a significant way the location of business activity in the Community.
Business activity in this respect also includes all activities carried out within a group of companies.
The tax measures covered y the code include both laws or regulations and administrative practices.
B. […] tax measures which provide for a significantly lower effective level of taxation, including zero taxation, than those levels which generally apply in the Member State in question are to be regarded as potentially harmful and therefore covered by this code.
[…]
Standstill
C. Member States commit themselves not to introduce new tax measures which are harmful within the meaning of this code. […]
K. The Council calls on the Member States to cooperate fully in the fight against tax avoidance and evasion […]


  1. European Commission (2014): Harmful tax competition []
  2. European Commission (1998): Council Conclusions of the ECOFIN Council Meeting on 1 December 1997 concerning taxation policy (98/C 2/01) []

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