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.

Additional Metadata
Keywords Allowance for corporate equity, Comprehensive business income tax, Corporation tax, Destination-based cash flow tax, Dual income tax, European Union, Rate of return allowance, Tax coordination
JEL Business Taxes and Subsidies (jel H25), Firm (jel H32), State and Local Taxation, Subsidies, and Revenue (jel H71), Interjurisdictional Differentials and Their Effects (jel H73), Intergovernmental Relations; Federalism (jel H77)
Persistent URL,
Journal International Tax and Public Finance
Cnossen, S. (2017). Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?. International Tax and Public Finance, 1–33. doi:10.1007/s10797-017-9471-2