Tax harmonisation : a vehicle for the effective operation of the internal market

Abstract

My dissertation is an analysis of a concept which has given rise to much controversy and debate in the European Union over the past few years - whether the harmonisation of taxes is necessary to achieve a fully functional Internal Market. I have examined the constituent elements of this phenomenon - the Internal Market, and the historical and political evolutions which led to its shaping up. I also analysed the concept of 'harmonisation' and what tax harmonisation would involve. Since taxes are divided into direct and indirect taxes, I discussed the harmonisation of these two different streams of tax in two different Chapters. Direct taxation refers to corporate and personal income taxes, whereas indirect taxation refers mainly to the taxation levied on the consumption of certain goods. Direct tax systems require only limited harmonisation, and the need to harmonise arises where they entail discrimination, double-taxation, or unintended non-taxation. On the other hand, a large measure of harmonisation is necessary in the Value Added Tax and excise fields to avoid obstacles and distortions to the Internal Market, for instance, by hindering the free movement of goods and the free supply of services within a Single Market, and by causing distortions of competition. Therefore, the scope and rates of VAT and excise duties are subject to European legislation. I examined the advantages and disadvantages of tax harmonisation, and the effects it may leave on the economies of the individual Member States. I delved into the possibility of enhanced cooperation among Member States, and whether this would be a better option for all Member States involved ... after all, enhanced cooperation too is a form of harmonisation, though a less radical and complete one than the complete harmonisation of tax laws.