TY - JOUR

T1 - The dilemmas of tax coordination in the enlarged European Union

AU - Brøchner, Jens

AU - Jensen, Jesper

AU - Svensson, Patrik

AU - Sørensen, Peter Birch

N1 - JEL classification: H25, H73, H87

PY - 2007

Y1 - 2007

N2 - This study evaluates the economic effects of corporate tax coordination in the enlarged European Union (EU) using a computable general equilibrium model. Our main findings are as follows: (i) Corporate tax coordination can yield modest aggregate welfare gains. The 2004 enlargement of the EU has increased the potential gains from tax harmonization, provided corporate tax rates and tax bases are harmonized at their unweighted averages. (ii) All scenarios for coordination leave some EU Member States as winners and others as losers. An agreement on tax coordination is therefore likely to require elaborate compensation mechanisms. (iii) The large and diverse country effects suggest that Enhanced Cooperation for a subset of the Member States may be the most likely route towards tax coordination. (iv) Identifying winners and losers from coordination for the purpose of a compensation mechanism may be problematic, since countries experiencing gains in GDP and welfare tend to lose tax revenues, and vice versa

AB - This study evaluates the economic effects of corporate tax coordination in the enlarged European Union (EU) using a computable general equilibrium model. Our main findings are as follows: (i) Corporate tax coordination can yield modest aggregate welfare gains. The 2004 enlargement of the EU has increased the potential gains from tax harmonization, provided corporate tax rates and tax bases are harmonized at their unweighted averages. (ii) All scenarios for coordination leave some EU Member States as winners and others as losers. An agreement on tax coordination is therefore likely to require elaborate compensation mechanisms. (iii) The large and diverse country effects suggest that Enhanced Cooperation for a subset of the Member States may be the most likely route towards tax coordination. (iv) Identifying winners and losers from coordination for the purpose of a compensation mechanism may be problematic, since countries experiencing gains in GDP and welfare tend to lose tax revenues, and vice versa

KW - Faculty of Social Sciences

KW - Corporate tax harmonization

KW - EU tax coordination

U2 - 10.1093/cesifo/ifm017

DO - 10.1093/cesifo/ifm017

M3 - Journal article

VL - 53

SP - 561

EP - 595

JO - CESifo Economic Studies

JF - CESifo Economic Studies

SN - 1610-241X

IS - 4

ER -