Vexen Crabtree <VexenCrabtree>

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Standardisation of Corporate Tax Across EU 27305 weeks ago
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It is a Governments' job to protect people against forces beyond their control, so, legislating on working conditions is appropriate. But political interference in normal market forces isn't democratic. It is light totalitarianism. One way in which politicians control and skew market forces is by setting corporate tax rates. The standardisation of corporate tax over multiple countries has many benefits. "European politicians began puzzling over tax harmonisation in 1962".

?Now European Union plans for a common tax base have begun to gain pace and may even take wing, in spite of several countries' efforts to stop them. On May 2nd the European Commission gave an upbeat report on its progress towards legislation on a common consolidated corprate tax base. L�szl� Koc�cs, the EU's tax commissioner, said a proposal would be ready in the first half of 2008 and tentatively suggested that a common base could be in place some time "after 2010". Under the commission's rough plans, companies would adopt a tax base for their EU-wide activities, rather than face a tangle of 27 different regimes. [...] Many of the details, such as the delicate issue of how to split revenues between countries, are still to be hammered out. But one red line has been drawn: national exchequers will continue to set their own rates.?
[The Economist 2007]

The benefits are numerous. (1) Companies would simply "adopt a tax base for their EU-wide activities, rather than face a tangle of 27 different regimes". This would massively decrease the accounting costs for multinational companies. Accounting is one of those non-productive expenses that wastes money. With standardized rates, overall efficiency will increase. (2) Politicians would have one less tool to artificially manipulate markets. (3) European companies would be more competitive globally as overheads decreased. (4) The single-market would benefit. (5) Less overheads means lower prices for consumers.

But implementing this is difficult as Governments such as Irelands' will not want to lose a tool they use (low corporate tax) to attract business. General centralisation-phobia will also impede progress. Here comes another useful application of a potential multispeed Europe approach: "A core group could advance" and standardize rates. This would grant fractions of the benefits listed above and prove the principle. But, countries such as Ireland would temporarily have an even bigger advantage, so, there is an argument that all 27 EU countries should be compelled to proceed together. In either case, the benefits of corporate tax normalisation are clear: the toes that are stepped on are only the ones who were politically manipulating the market.
 posted by Vexen Crabtree 

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