Factor Mobility and Tax Harmonization
A major aim of the establishment of the Common Market was full factor mobility. In this aim the Community was perceived as moving well beyond a narrow customs union and much closer to a real common market of goods, services, and factors of production, and perhaps toward economic union.
The free flow of labor within the Common Market was provided for in Article 48 of the Treaty of Rome (see Appendix), and indeed, this has been an area of real success in the Community. Only identity cards are needed to cross boundaries, no work permits are needed for Community workers, and residence permits are automatically renewable after five years. There is, of course, priority given to EC over non-EC workers, and the situation in West Germany of "temporary" (especially Turkish) workers has not always been harmonious. During the 1982-83 recession, for example, there were some unfortunate confrontations, and the situation has never been totally free from discord.
An initial concern regarding intra- EC migration was social security payments, especially retirement benefits. The concern was how to treat periods earned in the wage earner's previous country, and how to adjust payments for non-nationals. The decision was made in the liberal direction, with previous periods earned receiving full credit in the new country, and benefit treatment equal to nationals. The potential problem of resource reallocation created by such a liberal ruling is dealt with below, as it is essentially identical in nature to direct tax treatment between union countries.