International Handbook on the Economics of Integration, Volume II
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International Handbook on the Economics of Integration, Volume II

Competition, Spatial Location of Economic Activity and Financial Issues

Edited by Miroslav N. Jovanović

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic integration also provides a theoretical and analytical framework to the reader, presenting select analytical studies and encouraging further research.
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Chapter 19: Fiscal Integration in the European Union

Frans Vanistendael


* Frans Vanistendael 1 HOW TO APPROACH FISCAL INTEGRATION Integrated Tax Systems, an Introduction Fiscal integration is a relative and not an absolute concept. There are various degrees of fiscal integration and these are never static or stable, but they are dynamic and evolving. Fiscal integration is intimately related to economic integration and it is one of the major factors playing a role in economic integration. When is a tax system fully integrated? It is probably safe to state that national tax systems are generally considered as examples of full fiscal integration. In such an integrated system taxpayers are subject to the same tax rules and the tax policy is being steered from a central point of government so that the fiscal environment is the same for all economic actors. That is certainly not the case for taxpayers in the 27 member states of the European Union (EU). However, even in a national tax system the rules are not always the same for all taxpayers. Governments at a lower level such as provinces or municipalities may levy different surcharges in personal or in corporate income tax and even impose levies that are totally independent. The local trade tax1 in Germany is notorious for its variations. In federal states the differences may be even more significant.2 Not only may the rates be different, but also the rules determining the tax base or the tax procedure.3 Yet no one is pretending that the tax systems of the Federal Republic of Germany, Canada, the...

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