EU tax harmonisation and tax competition – lessons to Hungary

Abstract

This study explains the correspondence between tax harmonisation and tax competition, focussing its arguments around the notions of competition and competitiveness. The development of the European integration, the particular forms of integration and the particularities of the common budget give rise to the necessity of developing and operating a common tax policy and a system of taxation, with the harmonisation of national tax policies and systems of taxation as a minimum requirement. With deepening globalisation and a gradual phase-out of discriminative tax allowances incompatible with market economies, however, it is not only countries or their companies and sectors that compete but also their tax policies and systems of taxation – primarily in reducing their tax rates. As a consequence of this, however, a requirement follows for Member State tax policies and systems of taxation to compete and be tendered in competition.