When European countries adopted the Euro as a single currency in Europe was unified style common market of the United States of 300 million citizens, but each knew States should give up the sovereignty of a certain competencies , such as currency devaluations or changes in interest rates , which were becoming direct competition European Central Bank .
You do not need the advantages of a large common market : exports from one country to another without risk of exchange rate, capital mobility between countries freely , and have a strong currency that would rival the dollar. While the disadvantages became apparent, with the current debt crisis in which we are engaged , but also solutions , and one of them, perhaps the most important passes tax harmonization at European level.
Unify or harmonize ? ?
There are two terms that are being used in the wrong way in this process: unify and harmonize . But keep in mind that they are two different concepts.
It’s simple. Unify is to equalize taxes in each of the countries that have adopted the Euro . This means that taxes are the same in each of them, both in type of tax as the tax rate . For example, if Spain has a tax on consumption , here we call it VAT at 18 % , that Germany had the tax with the same tax that Spain , also at 18%.
Logically , the tax burden among different countries is not the same , and it is impossible that fiscal policies could meet in the short term. That is why the talk of harmonization. I mean , you should not implement a unification tax hit of all euro area countries . Rather, we should speak of an approximation of the fiscal regulations of these countries.
This would be achieved by changing the laws of each of the countries in tax matters, to iron out the differences that may exist. This was already enshrined in the Treaty of Rome , which marked the beginning of the European Union as such.
Why unify ?
This does not mean that only one central state at the European level which collects all taxes. No. We have said that Europe is a large market in the freely moving people , capital, goods and services. To make this operational , and especially the capital to move freely, that the taxes need to be similar .
When a person changes from one country to another EU therefore should be taxed in both countries , otherwise distort prices , by varying levy a tax rate in both countries. That is, a product in Spain does not cost the same as one in France , because VAT is different in each country.
That’s why several of the taxes that have been in the spotlight for modification are consumption taxes : especially VAT and excise duties as duties on alcohol and snuff .
Why are you being so difficult ?
As was the case when it adopted the Euro , this set of countries would lose sovereignty over tax legislation . Keep in mind that taxes are an important part of the income of the countries , which as any company or family budgets have to cover the expenses of the year in question. Lower taxes would have to give up a number of expenses .
Instead, climb a certain tax is an unpopular measure , which would make the income of families descended further , and therefore penalize consumption. That is why few politicians promoting such measures .
In Spain , as in other euro area countries as well , many of the taxes are assigned to their regions , which directly have full autonomy to manage and finance their own expenses. And they are not willing to lose the sovereignty that have already won . Moreover, many of them still want more autonomy in tax matters .
While we may not be able to try to unify in some way tax legislation within countries , it will certainly make complicated, try to harmonize the taxation laws in Europe. Remember that countries like Denmark and Finland have a tax burden around 50% , something unthinkable in countries like Spain today the short term.