Taxation in the European Union:
The Process of
Corporate Tax Harmonisation in the EC
Chetcuti 2001. All Rights Reserved. harmonization
For a number of
the Commission has attempted to harmonise various differences between the
national corporate income tax systems and to remove discriminatory
tax treatment by national tax systems of international investment activities.
proposals have concerned several national aspects, including the systems of
withholding tax on dividends and corporate taxation, the carry-over of losses
and the determination of taxable profits of enterprises. They also concerned
international aspects including cross-border mergers, parent-subsidiary relations,
the elimination of double taxation in the case of adjustments of transfer prices
and mutual assistance in direct taxation.
In 1989, of all these proposals, only the one regarding mutual assistance
had been adopted, and the reasons for this lack of success are to an extent
and still is, required for the adoption of tax harmonisation measures, and with
the gradual erosion of MS sovereignty in other areas, especially in indirect
taxation, there is an obvious reluctance to relinquish more autonomy.
Another reason is
that harmonisation of corporate income taxes would inevitably result in a
decrease in tax revenue for high tax countries such as Denmark, which have been
reluctant to support wholeheartedly the Commission’s proposals.[cliv]
It is therefore understandable that countries who stand to lose by further
harmonisation will hinder further progress and stall the process of integration
in this area.
What is sure is
that, if it wants its agenda to go on and its proposals to become law, the
Commission would do well to tame its enthusiasm and not try to eat too much at
Chetcuti. All Rights Reserved.