Harmonization of european corporate taxation

Proceedings of 2nd International Conference on Business, Management and Economics

Year: 2019


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Harmonization of european corporate taxation

MSc. Matjaž Kovač



The recent financial and economic crisis of the European Union had exposed the necessity to complete monetary union with an economic union. The EU’s common market is one of the most important aspects of the EU’s work. The creation of a common market also includes the elimination of barriers that still prevent the free movement of goods and services. The Member States agreed in the Lisbon Strategy to achieve the goal that Europe should be the most competitive economy in the world by 2020. One of the elements of a stronger economic integration is the harmonization of the tax systems (e.g. the corporate tax regimes) of the 28 Member States. The European Commission proposed a common mechanism for the calculation of the corporate tax base, the consolidation of the tax bases incurred in the different Member States and the subsequent allocation of the consolidated tax base between the Member States (formulary apportionment). The system envisaged by the European Commission is already introduced by the world highly integrated economies, like the United States of America and Canada on a domestic level, where the corporate tax base shall be also allocated between the states and the provinces based on the formulary apportionment method.

Keywords: Harmonization of the Tax Base, Home State Taxation, Common Tax Base, Consolidation, Formulary Apportionment.