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  • Service: Tax, International Corporate Tax, Global Indirect Tax, Mergers & Acquisitions, Global Transfer Pricing Services, International Executive Services, Global Compliance Management Services
  • Type: Business and industry issue, Event, Survey report, White paper
  • Date: 11/16/2012

Europe: Integration or fragmentation? 

What might the future shape of Europe be? And how might this impact business taxes and tax directors?

Europe: Integration or fragmentation?


Given the events of the past few years, it is not surprising that Eurozone observers seem rather split in their forecasts for the outcome of the market. Some, the Euroskeptics, are adamant that the current crisis will result in an increasingly fragmented union where tax regimes and economic fortunes rapidly diverge thus bringing a slow but sure end to the union. Greece’s exit from the Euro will only catalyze what is already underway, they assert.


Optimists and Euro-boosters, on the other hand, say that the current crisis will – eventually – lead to greater cohesion between the EU Member States who, once banded together to save the single currency, will continue to work together to bring greater integration between EU Member States. Ultimately, this will lead to more consistent tax rates, requirements and legislation across the union.


According to the Studio panel, the optimists will likely win the day. Indeed, our panelists – made up of representatives from across Europe – felt strongly that the European Union had, on balance, brought a wealth of important benefits to the member states and their citizens.


Both Mr. Walter and Mr. Sasi offered a view that much of the EU’s current popularity crisis was due to a case of bad public relations; citizens are simply not aware of all of the great benefits that the creation of the EU has brought to Europe and, therefore, Member States need to work harder to sell its achievements to an increasingly skeptical population.


Ultimately, the panel agreed that the only path available to the EU is to create greater harmonization of taxation as part of a larger effort to create a stronger and more resilient political and fiscal union. They also suggested that this process had actually been underway for some time by virtue of the European Court of Justice who, by ensuring that all Member State tax laws abided by the four basic principles of freedom in the EU treaty, had brought a measure of harmonization and had set the groundwork for future integration. This process had actually been underway for some time by virtue of the European Court of Justice who, by ensuring that all Member State tax laws abided by the four basic principles of freedom in the EU treaty, had brought a measure of harmonization and had set the groundwork for future integration. The new way forward for tax harmonization in the EU is through “soft law”. Codes of conduct become more important tools to drive harmonization instead of regulations and directives.


Panelists also discussed a number of specific topics such as the long-mooted Common Consolidated Corporate Tax Base (CCCTB) initiative. But while the panel seemed to be unanimously in favor of the aims of the CCCTB, there was deep skepticism that the initiative would ever rise up off the planning table.

 

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