Tax Obstacles for the Development of an Effective Euro-Mediterranean Free-Trade Area. An IFTA model for the European Union?

As we know, the European Union has faced the challenge of harmonization in the tax field with varied results. We may think that the advanced harmonization in indirect taxes (custom duties, VAT and excise duties) has reduced the distortions that they may create in the intra-EU commerce. Far from this assumption, in the paper we will underline how the lack of a complete harmonization may create competitive advantages in certain countries and sectors. Specifically, we will examine how the road haulage sector is affected by the differences in diesel excise duties among Member States. The proposal for a Euro-Mediterranean Free-Trade Area would face the same problems as the European Union. If there are distortions inside the European Union, the extension of the free trade area to other mediterranean countries would possibly worsen it. This is why we suggest the establishment of a system equivalent to the IFTA (International Fuel Tax Agreement), existing in the United States and Canada, in order to achieve an efficient haulage system free of tax distortions.