A Taxing question for Europe

A Bradford academic's investigation of the politics of international tax policy co-ordination has been graded outstanding by the Economic and Social Research Council.

Among the comments, one anonymous reviewer stated that the project, by Dr Claudio Radaelli, a member of the Department of European Studies, "should act as a model for future academics applying for small or large grants of how easily academic research can be linked and made accessible to policymakers".

Dr Radaelli said: "Conventional wisdom has it that the integration of markets and trade, on the one hand, and technological innovation, on the other, are the driving forces behind the momentum for tax co-ordination in the European Union and the Organisation for Economic Co-operation and Development. But my investigation into tax globalisation sheds light on more political factors.

"The European Commission, the Brussels-based bureaucracy, has been entrepreneurial in re-launching what had become one of the doziest debates in the EU, on the co-ordination of direct taxes.

"The Commission has insisted on the argument that tax competition, generally a healthy component of states' behaviour, can be harmful when a country poaches other countries' tax bases. The Commission, which formerly tried to eschew any political consideration when dealing with taxation, has now stressed the political consequences of harmful tax competition in terms of unemployment and damage to the welfare state." Dr Radaelli later put together a task force on the future of the EU tax system with the help of the Brussels-based Centre for European Policy Studies, composed of policymakers and the international business community, including the major EU multinationals and US, Japanese, and Swiss business leaders.

The task force's final report argues that current EU tax policy, even if completed by the adoption of the proposals emphatically rejected by the British negotiators at a EU summit in Helsinki in December 1999, will not solve the tax problems of companies doing business in the single market.

Multinationals look at their business activities in the single market as a single, integrated entity, but then they have to "disintegrate" business in order to comply with 15 tax rules and administrations - one for each EU member state.

Dr Radaelli said: "It is likely that the new Commissioner in charge of tax policy, the Dutch free-market advocate Frits Bolkestein, will seek to rebalance EU tax policy by taking on board the arguments of the multinationals. But will the finance ministers of the EU follow him?"

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University - Public Relations - Annual Reports - 2000 Contents - Research

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