14 Colum. J. Eur. L. 377 (2008)
Charles E. McLure Jr., While Deputy Assistant Secretary of the Treasury for Tax Analysis in 1983 85, the author chaired the staff-level Task Force that supported the Worldwide Unitary Taxation Working Group appointed by Treasury Secretary Donald Regan at the request of President Ronald Reagan. A preliminary version of this paper was presented at a conference on “National Fiscal Sovereignty: Integration and Decentralization,” held in Ravenna, Italy on October 13-14, 2006.
The Member States of the European Community have systems of taxing corporate income that are more appropriate for nations than for members of an economic union. This paper describes the problems of the present system, which is based on separate accounting and arm’s length pricing, the advantages of one based on consolidation and formula apportionment, such as those employed by the US states and Canadian provinces, and the desirable characteristics of such a system.
The European Court of Justice outlaws practices inconsistent with a single market. But judicial harmonization cannot achieve a fully harmonized system. Since the required legislative harmonization is stymied by the requirement in the EC Treaty that tax provisions be adopted unanimously, the European Commission has proposed that “enhanced cooperation” between as few as eight Member States be employed to initiate harmonization. The paper examines judicial, legislative, and cooperative approaches to corporate tax harmonization in the EC and the US.