GMO-free regions in Europe: an analysis of diffusion patterns

Genetically modified organisms (GMOs) have been a controversial issue in the European Union (EU). A growing number of member states and regions within the member states oppose the EU’s agro-biotechnology policy, resulting in a complex multi-level structure of policy-making. This study is interested in the regional opposition to GMOs and scrutinises the determinants of membership in the European Network of GMO-free Regions. In terms of theory, this study builds on the literature of policy diffusion. For the analytical purpose, we distinguish among four diffusion mechanisms: learning from earlier adopters, economic competition among proximate regions, imitation of economically powerful regions and deviation from national law. Our research questions are the following: How has membership developed since the foundation of the network? Which mechanisms explain the diffusion patterns observed? The empirical findings show that membership in the network has grown substantially between 2003 and 2014, which supports the general expectation that there is a diffusion of GMO-free regions. Yet, most new member regions are located in the same member states as the regions that founded the network. In other words, what is observed is intra-country diffusion rather than inter-country diffusion. The empirical findings provide support for the importance of learning from earlier adopters for the growing of the European Network of GMO-free Regions.     

Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

This paper surveys and evaluates the corporation tax systems of the Member States of the European Union on the basis of a comprehensive taxonomy of actual and potential regimes, which have as their base either profits; profits, interest and royalties; or economic rents. The current regimes give rise to various instate and interstate spillovers, which violate the basic tenets—neutrality and subsidiarity—of the single market. The trade-offs between the implications of these tenets—harmonization and diversity, respectively—can be reconciled by a bottom-up strategy of strengthening source-based taxation and narrowing differences in tax rates. The strategy starts with dual income taxation, proceeds with final source withholding taxes and rate coordination, and is made complete by comprehensive business income taxation. Common base and cash flow taxation are not favored.     

Decline of Controlled Foreign Company Rules and Rise of Intellectual Property Boxes: How the European Court of Justice Affects Tax Competition and Economic Distortions in Europe

The European Court of Justice (ECJ) has become an influential player in the field of direct taxation in the European Union (EU) in the past 20 years. However, it is unclear whether or not the ECJ's decisions and the corresponding reactions by the member states actually contribute to tax neutrality in economic terms and, therefore, to the achievement of the internal market. In 2006, the ECJ limited the applicability of specific tax rules in the EU that are intended to prohibit the excessive use of low‐tax countries by multinationals. Our counterfactual analysis shows that the court's restriction of so‐called controlled foreign company rules and the related second‐round reactions by some member states – i.e. the introduction of low‐tax regimes for income from acquired intellectual properties (IP boxes for acquired IP) – cast doubt on the seemingly positive effects the ECJ has on reducing tax distortions. In addition, we demonstrate that the restricted applicability of IP boxes as endorsed by the OECD and the European Commission would strengthen tax neutrality in Europe.     

LARGE ACCOUNTING FIRMS’ SURVEY REVEALS EMERGENCE OF “TWO STANDARD” SYSTEM IN THE EUROPEAN UNION

Convergence with International Financial Reporting Standards (IFRS) as promulgated by the International Accounting Standards Board (IASB) is receiving great attention. In 2005, all listed companies domiciled in the European Union (EU) will be required to prepare consolidated accounts based on IFRS. Individual EU member states are, however, permitted to decide whether IFRS will be required or allowed for non-listed companies or for listed companies’ individual accounts. Based primarily on data collected by the six largest international accounting firms during their most recent convergence survey, this paper examines each of the 15 EU member states’ convergence plans and their perceived barriers to convergence.The findings indicate that most EU members do not plan to converge national GAAP with IFRS, thereby highlighting the great significance of the large firms’ concerns regarding emergence of a “two-standard” system in the EU. The survey indicates the majority of EU countries will continue to require or allow national GAAP for individual accounts. While Belgium is considering requiring IFRS for all consolidated accounts, other EU countries have decided to allow or are considering allowing non-listed companies to prepare IFRS consolidated accounts.In most EU countries, the link between financial accounting and tax accounting represents a major barrier to convergence. Other frequently cited barriers include disagreement with certain IFRS and the complicated nature of certain IFRS. International requirements for financial instruments are viewed as particularly problematic.     

Hostages, free lunches and institutional gaps: the case of the European Currency Union

This paper argues that the strong member states of the European Currency Union are hostages of a financially distressed member state so that they are compelled to provide financial support. Moreover, due to the dynamics of the interaction game, a debt relief is a free lunch for the distressed country. This fosters moral hazard of distressed countries. In the absence of capital market control, European politics do not effectively monitor fiscal politics of member states. The lack of a long-term strategy of the European Currency Union to deal with distressed states has undermined the credibility of politics. This lack is also explained by a lack of a European Insolvency Charter. A viable Union requires such a charter with rules for handling distress. Moreover, politics should determine a mechanism to coordinate politics and capital markets in their monitoring of fiscal and economic policy of member states.     

International interest withholding taxation: Prospects for a common European policy

In 1989 the European Union member states rejected a proposal to introduce a minimum interest withholding tax of 15 percent. Some Union member states, however, remain keenly interested in bringing about some minimum level of international taxation of interest income. This suggests that member states will be asked to reconsider the issue in the near future. This paper first examines the effects of interest withholding taxes on financial markets. It then reviews some of the main aspects of potential tax reform in this area. A major challenge for any future proposal will be to satisfactorily integrate the banking system into a common interest withholding scheme.     

Country characteristics and preferences over tax principles

The European Union has long maintained an intention to move to the origin principle of taxation, but no progress has been made since the completion of the single market. The lack of progress seems surprising, given the significant support for the origin principle in the economic literature. However, there is a contrast between the European Union that contains countries of widely different sizes and productivity levels, and the theoretical literature that has focused on models with symmetrical countries. We extend the modelling of preferences over tax principles to incorporate asymmetries in efficiency and size. We show that asymmetry can cause disagreement among countries over tax principles to be sustained even with close economic integration. Large countries and inefficient countries are shown to prefer the origin principle. In contrast, small countries and efficient countries can have a preference for the destination principle. These results provide an insight into the political economy of the impasse in European Union tax policy.     

Evidence of the effect of domicile on corporate average effective tax rates in the European Union

We estimate (worldwide) corporate average effective tax rates (ETRs) from financial statements for companies domiciled in European Union (EU) member states during 7 years from 1990 to 1996. Our objective is to compare the tax rate effectively experienced by each company with the corporate statutory tax rate (STR) in the EU country in which each company is domiciled. The difference between the corporate statutory tax rate and the financial statement-based corporate average effective tax rate provides information on the magnitude of tax incentives provided by governments within the EU. These tax incentives come on top of the directly observable differences in statutory tax rates between EU member states. We find (1) that the use of tax incentives, over and above differences in STRs, differs substantially between EU member states (corporate domiciles) and (2) that the provision of tax incentives does not have the effect of equalizing corporate ETRs between EU member states (corporate domiciles).     

Accounting and taxation: Conjoined twins or separate siblings?

This paper explores the relationship between accounting and taxation through the recent proposals for curbing corporate tax avoidance advanced by the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU). The OECD is content to tweak pricing and fails to address the faultlines of accounting. The EU is promoting ‘unitary taxation’ and advocates a major reform of the way taxable profits are to be calculated. As IFRSs have reduced the usefulness of accounting numbers for taxation purposes, the EU has sought to recalibrate basic elements of accounting. This has considerable implications for the development of accounting.     

Taxing commercial motor fuel in the European Union: the case for an apportionment-based, destination-principle system

Motor fuel is taxed by European Union member states where purchased. This article describes (a) the case for destination-based taxation of motor fuels, (b) economic distortions, incentives for destructive tax competition, and questionable division of tax base inherent in purchase-based taxation of commercial motor fuel, (c) loss of fiscal sovereignty inherent in minimum tax rates, imposed to alleviate the first two problems, and in uniform rates, (d) the apportionment-based system employed in the US and Canada and its advantages, (e) technology to determine distance traveled in each member state, and (f) legal and political obstacles to adopting an apportionment-based system.      

Exploring Formula Allocation for the European Union

This paper explores the efficiency impacts of two methods of consolidated base taxation with formula allocation under consideration in the European Union. The first method, common (consolidated) base taxation (CCBT), would allow companies to choose a single tax base for their EU-wide operations. This tax base would be common throughout the participating member states. The second method, Home State taxation (HST), would also allow companies to choose a single tax base for their EU-wide operations. But, unlike with CCBT, the tax base would be defined according to the rules in the company's residence, or home, state. Thus, several different tax bases would exist within the EU. Both methods would use a common formula to distribute profits across countries. This paper finds that since countries continue to set corporate income tax rates, economic inefficiencies continue to exist under both methods. However, under HST, since the tax base differs according to residence, additional inefficiencies may arise depending on whether countries reduced their tax rates to combat the incentive for companies to relocate to locations with narrow tax bases.     

The first five years of the EU Impact Assessment system: a risk economics perspective on gaps between rationale and practice

In 2003, the European Commission (EC) started using Impact Assessment (IA) as the main empirical basis for its major policy proposals. The aim was to systematically assess ex ante the economic, social and environmental impacts of European Union (EU) policy proposals. In parallel, research proliferated in search for theoretical grounds for IAs and in an attempt to evaluate empirically the performance of the first sets of IAs produced by the EC. This paper combines conceptual and evaluative studies carried out in the first five years of EU IAs. It concludes that the great discrepancy between rationale and practice calls for a different theoretical focus and a higher emphasis on evaluating empirically crucial risk economics aspects of IAs, such as the value of statistical life, price of carbon, the integration of macroeconomic modelling and scenario analysis.     

The rise and fall of subsidiarity

The concept of subsidiarity is examined as a possible golden rule to be applied in restructuring the federal balance, ie the relationship between the EC, the member states and the regions. The concept of subsidiarity is used broadly to include an examination of the kind of institutional rearrangement that the EC is trying to define for itself. Four deficits (capacity, policy, implementation and democracy) of the present institutional set-up are reviewed in order to determine what kind of innovative arrangements need to be designed to enable the EC to face the challenges of the next decade. On the assumption that the process of integration has indeed become irreversible, two options in the institutional development towards political union are evaluated.     

Promoting youth employment through multi-organizational governance

Youth unemployment is a major challenge in Europe and the most important EU-level policy response to youth unemployment is the Youth Guarantee, which was adopted in 2013. Public employment services are the central bodies implementing the Youth Guarantee in most EU member states, but they often act in partnership with other organizations. This paper examines the importance of the national organization that takes the lead in the multi-organizational networks responsible for implementing the Youth Guarantee. The author also analyses the best governance arrangements to produce the intended policy outcomes.     

The Taxation of Banking in an Integrating Europe

The banking sector is subject to explicit taxation and to bank regulation and supervision with quasi-fiscal implications. The assignment of national fiscal policy rights and duties regarding international banks in the EU varies with the fiscal instrument and with whether the international bank owns foreign branches or subsidiaries. Decentralized national policy-making in the EU gives rise to fiscal burdens on banks that differ internationally and with the national origin of banks in the same country. This paper discusses the international aspects of the overall fiscal regime facing banks in the EU and it evaluates some avenues for reform.     

Volatility in stock returns for new EU member states: Markov regime switching model

In this paper, we investigate the volatility in stock markets for the new European Union (EU) member states of the Czech Republic, Hungary, Poland, Slovenia and Slovakia by utilising the Markov regime switching model. The model detects that there are two or three volatility states for the emerging stock markets. The result reveals that there is a tendency that the emerging stock markets move from the high volatility regime in the earlier period of transition into the low volatility regime as they move into the EU. Entry to the EU appears to be associated with a reduction of volatility in unstable emerging markets.     

THE TRANSITION TO A SINGLE INSURANCE MARKET IN THE EUROPEAN UNION

Abstract: The European single insurance market incorporates the member stales of the European Union (EU). The legal framework for the market was enacted on June 30, 1994. The framework provides, above all, for a closely integrated supervisory (regulatory) system, a single license for the whole market and single home country control. Currently, some significant obstacles are slowing the realization of the European single insurance market, while several important economic policy and public interest questions remain to be answered.     

The first steps towards harmonizing public sector accounting for European Union member states: strategies and perspectives

This paper analyses the process that led the European Commission to the decision to develop European Public Sector Accounting Standards (EPSAS) for harmonizing public sector accounting practices within the European Union. The paper finds that there was limited scope in terms of stakeholder participation in the public consultation that served as a basis for the decision. In addition, the decision to adopt EPSAS for EU member states raises questions on the relationship between regional and global governance in the area of public sector accounting.     

Extreme coexceedances in new EU member states’ stock markets

We analyze the financial integration of the new European Union (EU) member states’ stock markets using the negative (positive) coexceedance variable that counts the number of large negative (large positive) returns on a given day across the countries. A similar analysis is performed for the old EU countries. We use a multinomial logit model to investigate how persistence, asset classes, and volatility are related to the coexceedance variables. We find that the effects differ (a) between negative and positive coexceedance variables (b) between old and new EU member states, and (c) before and after the EU enlargement in 2004, suggesting a closer connection of new EU stock markets to those in Western Europe.     

Taxes in an e-commerce generation

Rapid growth in e-commerce has altered the ability of jurisdictions to enforce commodity taxes on a destination basis. This results in different effective tax rates depending on the way in which goods and services are purchased and the characteristics of both the products and the sellers. We discuss the arguments for the destination principle as the appropriate place-of-taxation rule for consumption taxation of cross-border trade. We analyze various recent reforms to the value-added tax in the European Union in response to e-commerce. We then examine various policy options in the USA—maintaining the status quo, changing nexus rules, states adopting information reporting, and national reforms that require firms to remit taxes regardless of physical presence—and relate them to the recent European reforms. We conclude based on our analysis and the recent European Union experience that reforms at the national level appear to be the important next step to enforcing commodity taxes at destination in the USA.