Eurozone and Ccctb
Essay by annachiaps • November 19, 2016 • Essay • 2,679 Words (11 Pages) • 1,054 Views
EUROZONE AND CCCTB
INTRODUCTION
The European Union is going through a crisis that stems from its internal still fragmented
nature. Despite the common monetary policy, economic and political integration are far
from being obtained, and the difficulty to find consensus among partners, lest a common
policy, shows the struggles Eurozone is facing to reach harmonization on the one hand
and the legitimate desire for self determination of state members on the other. Each
sovereign state adopts its own regulations enforced by often-inefficient European
institutions on a variety of issues. In the current international scenario, dominated by
superpowers such as the US and China, individual nations are destined to lose their
power. The only way for Europe to be a strong player in the global setting is to increase its
strength as a Single Market through common economic, fiscal and budgetary instruments.
This essay examines common corporate taxation as an example of the issues faced by
Eurozone to pursue Europe’s internal unification. After describing the crisis Europe is
facing, the paper analyses in specific the problem of the opportunistic behaviour of big
corporations in their location strategies as an example of the difficulty of harmonising
economic and political decisions. CCCTB is presented as a possible solution to Europe’s
fragmentation and a way to strengthen the single market’s unity, and a discussion follows
on the difficulties of its implementation and the role of the Eurozone.
THE EUROCRISIS AND EUROPEAN FRAGMENTATION
The European Union is experiencing an existential crisis (Piketty, 2014). Every election in
Europe shows evidence that public opinion has lost faith in the Union, and eurosceptics
and independent movements are flourishing, challenging a complex architecture put in
place in times of peace and prosperity. The prolonged economic crisis has made the
problem more evident, as each state needs to address increasingly conflicting
stakeholders and the union has to address extremely complex humanitarian, social and
economic problems. This mainly involves the Eurozone countries, which are mired in a
climate of distrust and a debt crisis that is far from over: unemployment persists and
deflation threatens (Piketty,2014).
In spite of an overall agreement on several BCE
decisions, monetary decisions alone are insufficient to boost trust, and the eco-political
pillars of European integration are weak.
In the presence of very shaky consensus at home, European States have difficulty in
agreeing on some evident problems; the result is that Europe's existing institutions are
increasingly dysfunctional, decision making processes long and largely inefficient and
Eurozone members are easy prey for financial market speculators, given the financial
structure of some of them. Therefore, while competing with the US and other big
economies for resources and talent, European countries still face an internal competition,
and the presence of a single currency and the boundaries they impose weaken the ability
of each member state to contrast speculative moves. The Eurozone countries have
chosen to share their monetary sovereignty, and hence give up the weapon of unilateral
devaluation, but without developing new common economic, fiscal and budgetary instruments (Piketty,2014).
Of particular interest for the purpose of this paper is the very diverse structure of corporate
tax: big global companies are clearly negotiating from a position of relatively high
bargaining power for resources and concessions with states, further reducing the
sovereignty power of individual European countries who – at the same time - voluntarily
self disciplined vis-a-vis Europe. The magnitude of interests involved (from employment to
tax revenues to economic impact) makes single states resistant to a common policy; this
has three negative effects for European Union:
-‐ Multinationals enjoy free riding
-‐ Internal consensus is diminished
-‐ The EU itself sees its reputation mined
The ability of the EU to regain control of, and effectively regulate 21st century globalised
financial capitalism would be an important eco-political result and would help reduce the
criticisms on Europe to burden themselves on trivial issues but ineffective on important
ones.
THE PROBLEM: TAXATION DISCREPANCIES LEADING TOWARDS THE SINGLE MARKET FRAGMENTATION
Tax Havens in Europe
A tax haven is a country that cuts deals with foreign companies, levying minimal or no
taxes (Dhammika Dharmapala, 2009); as tax rates on income or property are significantly
lower than in other countries, foreign companies are attracted to that specific country
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