ABSTRACT
Tax harmonization can have different meanings and can be related to different objectives. Harmonization of monetary policy within the European Monetary System (EMS) has led Germany to largely determine monetary policy for all EMS countries. Tax harmonization must also inevitably require some harmonization of expenditure levels and, perhaps, even of expenditure patterns, since tax expenditures may substitute for government expenditure and pattern of government expenditure may be influenced by the level and structure of the tax systems. The chapter discusses whether concerted harmonization of two major features of European Community (EC) corporate tax systems, namely the tax base and the tax rate, would be desirable. It explores several alternatives to concerted harmonization of tax rates. Harmonizing the tax base in the presence of nonuniform statutory corporate tax rates would maintain the scope for tax arbitrage through purely financial transactions. The international integration and liberalization of capital markets complicates the collection of personal taxes on capital income earned by EC residents.
