Tax Policy Challenges in the 21st Century

S. 472I. Introduction

In 1950, Robert Schuman, a former French foreign minister, declared that “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity”. After the end of the Second World War, the ultimate ambition was to secure peace by converging economies. The Schuman declaration was the starting point for building Europe, by now even having reached an economic and monetary union, with its central policy aim of establishing an internal market. In this context, European tax integration plays a decisive role, because the heterogeneity of national tax systems entails several obstacles to the internal market. As a consequence, the possibility of distortion in the efficient allocation of economic resources arises and, thus, the choice of investment may be based on tax considerations rather than on economic considerations.

Means of European tax integration are tax coordination and tax harmonization instruments. The tax policy strategy of the European Union emphasizes a path of tax coordination. In the 2001 Communication “Tax policy in the European Union – Priorities for the years ahead” the Eur...