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Reform and Coordination of Company Taxes in the European Union

In: Public Finance in a Changing World

Author

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  • Sijbren Cnossen

Abstract

In 1992, the Ruding Committee (1992), appointed by the European Commission to examine the need for company tax (CT) harmonization in the European Union (EU), presented its findings and recommendations.1 Although the Committee concluded that differences in CTs distort the workings of the internal market — differences which most likely would not be eliminated by market forces or tax competition — it nonetheless proposed to leave the CTs in the EU essentially the same as it had found them, replete with their widely diverging domestic and cross-border treatment of different kinds of returns and different kinds of recipients of the various returns. As argued below, however, differential treatment will perpetuate the distortions inherent in the current CTs and erode the taxing authority of source states. A minimum statutory CT rate of 30 per cent, proposed by the Ruding Committee, and the adoption of the (draft) directives of the European Commission2 are insufficient to repair the infringements of the neutrality and subsidiarity requirements, as applied to taxation, agreed to by the member states. More fundamental reform seems called for. Moreover, CT reform in the member states is a condition for CT coordination between the member states.

Suggested Citation

  • Sijbren Cnossen, 1998. "Reform and Coordination of Company Taxes in the European Union," Palgrave Macmillan Books, in: Peter Birch Sørensen (ed.), Public Finance in a Changing World, chapter 8, pages 221-254, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-14336-8_9
    DOI: 10.1007/978-1-349-14336-8_9
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    Cited by:

    1. Michael Devereux, 2004. "Debating Proposed Reforms of the Taxation of Corporate Income in the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(1), pages 71-89, January.
    2. Magni, Carlo Alberto, 2009. "Splitting up value: A critical review of residual income theories," European Journal of Operational Research, Elsevier, vol. 198(1), pages 1-22, October.
    3. Roberto Ghiselli Ricci & Carlo Alberto Magni, 2014. "Axiomatization of residual income and generation of financial securities," Quantitative Finance, Taylor & Francis Journals, vol. 14(7), pages 1257-1271, July.
    4. Silvia Giannini & Carola Maggiulli, 2002. "The Effective Tax Rates in the EU Commission Study on Corporate Taxation: Methodological Aspects, Main Results and Policy Implications," CESifo Working Paper Series 666, CESifo.
    5. Rumpf, Dominik, 2013. "Zinsbereinigung bei der Dualen Einkommensteuer," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 32, number urn:isbn:9783161528699, December.

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