Academic journal article Contemporary Readings in Law and Social Justice

Tax Harmonization Measures at Eu Level in the Corporate Tax Field

Academic journal article Contemporary Readings in Law and Social Justice

Tax Harmonization Measures at Eu Level in the Corporate Tax Field

Article excerpt


This paper addresses the issue of tax harmonization in the field of corporate taxation in the EU through the need to eliminate the negative effects of tax competition, being part of a larger study. Using analysis of situations created at Community level by tax harmonization measures, I concluded that in the introduction of a common consolidated corporate tax base, tax competition between the 27 Member States would perform only through tax rates, because are eliminate the possibility of granting tax incentives contained in different tax bases.

Keywords: European fiscal policy, fiscal harmonization, tax competition, tax corporations, the common consolidated corporate tax base (CCCTB)

1. Introduction

Since the establishment of the European Economic Community in 1957, there has been an ongoing debate on the need for cooperation and tax harmonization in Europe, the debate was intensified mainly the creation of EMU.

Regarding harmonization at European level may be defined as high level policy coordination in the European Union. Similarly, tea harmonization requires that in all Member States, more or less, to apply the same rules. However, if we look more closely at the various forms that European fiscal policy might take, it becomes clear that not everyone talks about the same.

While tax harmonization in Europe can be difficult, fiscal coordination is as necessary as it is desirable. Tax competition, however, is the result of international mobility of tax bases, such as companies and financial assets. This mobility was not driven only by technological innovations in transport and telecommunications sectors, but especially the political decisions of liberalization and deregulation.

This paper is divided into three sections, as follows: the first chapter presents, in chronological order, measures and regulations adopted at EU level that harmonize tax corporation, the second chapter is based on the new system proposed by EU, namely the implementation of a common corporate tax based and examines its impact on income tax collection using two scenarios detailed in the article, and the third part presents the conclusion of this analysis, namely the impact of the new tax harmonization measures on tax competition in the EU.

2. Measures Adopted at EU Level for Corporate Tax Harmonization

How harmonization, generally, involves applying the same rules to all states tax harmonization in the EU in the field of corporation tax dealt with Community law, establishing more regulations in this area, contained in Chapter Ten of Community Tax Doctrine. These regulations are the European Directives in the field of direct taxation of corporations, namely:

* Directive on a common system of taxation applicable to interest and royalty payments ("Interest and Royalties Directive"). Directive 2003/49/EC1

* Directive on taxation of mergers and divisions ("Merger Directive").2 Directive 90/434/EEC (as amended by Directive 2005/19/EC).3

* Directive on the common system of taxation applicable to parent companies and subsidiaries of different Member States ("Subsidiary Directive").4 Directive 90/435/EEC (as amended by Directive 2003/123/EC).5

Further along the line of harmonization, each Member State or candidate must transpose this Directive into national law.

The first proposals for tax harmonization were included in a report prepared in 1962 by Neumark Committee, which recommended that income tax systems should be harmonized with a differentiated system, with a lower rate of tax dividends than on undistributed profits.6

In 1969, proposals were submitted Parent-subsidiary Directive7 and Mergers Directive.8 These were followed by Van den Tempel report of 1970,9 which gave a classical tax system throughout the Community. A further resolution of Council in 1971, in terms of economic and monetary union, aimed at harmonization of corporate tax, and those types of taxes that could have a direct influence on the free movement of capital within the Community, and namely withholding tax on dividends and interest. …

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