Wednesday, June 26, 2013
C3.17 (Oudemanhuispoort)
As the financial crisis in the Euro zone deepens and the economies of Greece, Spain and Italy cause fears of further financial instability and heightened tax burdens throughout the rest of the Euro zone, key European leaders have advocated for deepening economic coordination rather than for scaling back the degree of economic interdependence in Europe. Though counterintuitive for some, they argue that monetary integration without further fiscal coordination will lead to protracted economic problems and resentful taxpaying citizens. These fears of widespread economic hardship and political instability have spurred major policy initiatives that were previously beyond the realm of political possibility. One approach to coping with economic instability that has emerged at the very peak of the Euro crisis in spring 2012 is the coordination of corporate tax policy in EU countries—an area previously beyond the competency of the European Union. Not only have France and Germany agreed to harmonize their corporate tax regimes, the European Parliament has passed far reaching legislation, surpassing the recommendations of the European Commission, to require countries to adopt a common corporate tax regime for companies with business activity across national borders. This paper explores the state of fiscal coordination and identifies the challenges of tax harmonization under conditions of deepening economic crisis in Europe today.
