Binding Coordination in the European Union: Status Quo and Ideas for a Brighter Future

Within the European Union, tax coordination in the field of income/corporate taxation is affected by two major categories of problems. From a quantitative perspective, that coordination is extremely narrow in scope, both because the impact of global tax coordination is, by its very nature, limited, and because the instances of EU binding coordination (harmonization) realized through secondary EU legislation are rare, due to the unanimity requirement under the special EU legislative procedure applicable in the field of direct taxation. From a qualitative perspective, harmonizing EU secondary legislation raises policy concerns and may trigger conflicts with the international tax obligations of the EU Member States. These are some of the negative effects of the political compromises underlying the adoption of direct tax directives in an enlarged European Union, which are caused by the above-mentioned special EU legislative procedure (based on unanimity). The paper analyses these problems and discusses how a directive on the allocation of taxing rights among Member States could improve the current situation and shift from Member States to the Union the competence to conclude tax treaties with third countries.