• ISSN: 2155-7950
  • Journal of Business and Economics

The Current Corporate Tax Rate Competition and the Applicability of the Current Reform Proposal

Sandra Clement
(Department of Finance, Faculty of Economics and Business Administration, Babes-Bolyai University Cluj, Romania)

Abstract: Company taxation in the Member States of the European Union (EU) has not so far been harmonized. Serious differences exist not only in the assessment bases but also in the tax rates. The wide range of profit tax rates for companies in the EU, currently vary between 9% and 35%. These differences in tax burdens affect the cross-border investments in the European Single Market. This causes distortions in the choice of location, the nature of investments and their funding. An efficient allocation of resources cannot be achieved in this way. The tax differences within the EU leads to shifting the book profits to Member States with low profit tax rates. Loss of tax revenue and conflicts between Member States on the distribution of tax revenue are the consequences. Without a certain degree of coordination of Member States’ tax policies in the field of company taxation, these problems won’t be solved. An EU reform of the tax system may be the solution. Thus, the aim of this paper is to discuss the application of the current reform proposal and to examine it as a possible solution for tax competition.  

Key words: corporate tax rate; harmonization; GloBE, tax competition

JEL codes: F6

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