tax harmonisation
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EXECUTIVE SUMMARY
This essay consists of an introduction to tax harmonisation in the EU, a brief history of this topic, its pros and cons and a personal conclusion.
INTRODUCTION
Since its inception there have been a number of reports and initiatives on the harmonisation of taxes in the European Union. However the 15 EU countries still operate most of their own national taxes, with only limited co-ordination between them. Economic integration and free trade agreements have eliminated several border controls among countries. The European Court of Justice has the right to overrule national sovereignty in tax matters where conflicts arise. An EU Code of Conduct also exists on business taxation to encourage EU governments to refrain from 'harmful forms of tax competition.
Given this environment, the biggest barrier to successful trade flow is the different tax system of each country. Tax harmonisation is regarded as the solution.
HISTORY OF TAX HARMONISATION
In 1962 the Neumark-Report stated that differences in corporate tax rates were an obstacle to a European single market. It recommended the introduction of a single corporate tax rate in the EEC, based on a spilt rate system (50 per cent on retained earnings, 15-25 per cent on distributed profits)...