Benassy-Quéré, A. & Wolff, G. (2014) “Tax harmonisation in Europe: Moving forward“, VoxEU Organisation, 22 Ιουλίου.
Tax harmonisation has been controversial since the establishment of the European Economic Community, and corporation tax proposals are currently on the table in the EU. Although tax competition can be beneficial, tax harmonisation could curb tax competition that leads to the under-provision of public goods or to burden-shifting from mobile to immobile tax bases. As yet, no agreement has been reached on any ambitious harmonisation plan for mobile tax bases. This column explores the possibility of implementing partial tax harmonisation for corporate taxation and the taxation of the banking sector.
The issue of tax harmonisation has been repeatedly debated in the EU since the European Economic Community was established. Substantial tax harmonisation exists in the area of indirect taxation, and proposals regarding corporations are on the table, such as the project of Common Consolidated Corporate Income Tax (CCCTB, see European Commission 2011a). According to widely accepted economic theory (Zodrow and Mieszkowski 1986), tax harmonisation is a way to curb tax competition that leads to either the under-provision of public goods or to burden-shifting from mobile to immobile tax bases. However it can also be argued that tax competition is beneficial as a way of taming the unchecked Leviathan – an ever-growing state. As yet, no agreement has been reached to implement any ambitious harmonisation plan on mobile tax bases. In Bénassy-Quéré et al. (2014), we explore the possibility of implementing partial tax harmonisation for corporate taxation and the taxation of the banking sector.
In the economic literature, coordination among a subset of players is not always beneficial. In the area of tax harmonisation, however, Konrad and Schjelderup (1999) demonstrate that, in the standard framework, tax harmonisation among a subset of countries is Pareto improving if tax rates are strategic complements, which is the case for corporate taxes (see below for empirical evidence). Furthermore, Conconi et al. (2008) show that those countries outside the coordination will impose a discipline on the coordinated ones, hence partial harmonisation benefits all countries relative to both global harmonisation and no harmonisation at all. A perhaps even more important argument for proceeding to harmonisation within a subset of countries comes from the substantial administrative costs for businesses arising from the large differences in the definition of tax bases across EU Member states, some of which are saved even with partial harmonisation. Indeed, our first proposal regarding corporate tax is more modest than harmonising tax rates, and the case for enhancing efficiency is even higher when one simply wants to harmonise tax bases on the basis on mutual agreement among a group of countries.
Σχετικές αναρτήσεις:
- European Commission (2014) “Do changes in cost-sharing have an impact on the behaviour of students and higher education institutions?“, Cost-sharing Impact Study, 23 Ιουνίου.
- Micossi, S. (2014) “Bail-in rules in EU banking union and financial stability“, VoxEU Organisation, 05 Ιουνίου.
- Kastelli I. and Caloghirou, Y. (forthcoming) “The impact of knowledge-intensive entrepreneurship on the growth and competitiveness of European traditional sectors“. In H. Hirsch-Kreinsen , I. Schwinge (eds.) Knowledge-Intensive Entrepreneurship In Low-Tech Industries, Cheltenham: Edward Elgar Publishing.