Exit Taxation on Capital Gains in the European Union: A Necessary Consequence of Corporate Relocations? (original) (raw)
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However, this does not account for the secular rise in profits nor for the greatly increased share of economic activity that is conducted in corporate form. These two factors should have resulted in a rise in corporate tax revenues. WORKSHOPS NO. 6/2005 165 THE FUTURE OF THE CORPORATE TAXATION Under the EU treaty, the Member States do not have to harmonize their CT rates or bases. Harmonization is to be "approximated" only if required for the functioning of the internal market. So far, CT harmonization has been confined to various measures aimed at promoting cross-border business cooperation between related companies 2 and to administrative assistance. 3 Furthermore, in 1997, a nonbinding Code of Conduct on Business Taxation, purporting to curtail 'harmful tax practices' by the Member States, was adopted (European Commission, 1997). These practices have regard to the tax-favored provision of financial services to third parties, intra-group financing and the licensing of intangible property in return for royalty payments. (They mirror the treaty ban on state aid to private enterprise.) Beyond this, regulations exist on the statutes for a European Company and a European Economic Interest Grouping. 4 The case for further tax coordination seems strong. Greater approximation of capital income tax systems could promote investment, improve the tax burden distribution and, last but not least, reduce compliance and administrative costs. While the normal return on mobile capital cannot be taxed at the same high rates as labor income, tax coordination should enable the Member States to capture some of that return. After all, capital is less mobile in the EU as a whole than between individual states. Tax coordination should also make it possible to tax firm-specific rents more effectively (although not at the same high rates as location-specific rents, if separately identifiable). Furthermore, there is no reason why foreign shareand bondholders should be completely exempt from tax. Beyond that, the CT is Admittedly, some of the revenue foregone has been made up by various base broadening measure. 2 These measures comprise the parent-subsidiary directive (90/435/EEC, amended by 2003/123/EC) which eliminates the double taxation and withholding taxes on dividends paid to defined parent companies, the merger directive (90/434/EEC amended by COM(2003)613final) which suspends the taxation of capital gains on defined crossborder mergers or reorganisations), and the interest-royalty directive (2003/49/EC) which eliminates withholding taxes on interest and royalty payments between defined related companies. 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Deakin Law Review, 2019
This article examines some aspects of the European Union's corporate tax setup which correspond to aspects of a country's corporate tax regime. The overarching question is whether there is such a thing as EU corporate tax law. This article seeks to address this in the context of the following issues: the existence of a uniform tax base and tax rates; the existence of anti-abuse rules and a transfer pricing regime; and, finally, the existence of a common tax administration and its powers. The article questions whether the peripatetic development of EU corporate tax law is suitable for the EU or whether it undermines its long-term objectives. The potential impact of Brexit in the development of EU corporate tax law is also addressed.