Anna Jeleńska
The essence of tax harmonization
Summary
The essence of tax harmonizationThis article examines the case for tax harmonisation and its meaning. There is no consensus on the technical definition of tax harmonization. The term has been used in the most varied ways. At one extreme, definitions of tax harmonisation may be concerned with arrangements whereby the tax system of one country takes into account other tax systems in the form of double taxation agreements and bilateral tariff reductions. At the other extreme, they can refer to the complete standardisation of forms of taxation, tax bases and tax rates.
So the issue is a complex one and that difficulties have arisen because of a lack of clarity about what tax harmonisation actually involves and what it should and should not be expected to achieve.
In my opinion taxes are only harmonized if they do not cause imbalances or disparities between the countries (or other structures) in which they are applicable, and thus the taxes (in all their forms) of these countries are neutral for the relationship between the two countries (or structures). The term "tax harmonization" should be understood as causing the above state of harmonization of taxes by any means. Case law of the European Court of Justice has also led to ‘indirect’ harmonization.
Meanwhile, tax harmonisation in the European Union is part of a much wider programme of integration and has specific aims beeing set out in the EU Treaties. Such harmonisation is necessary to ensure the establishment and the functioning of the internal market.