Business Environment

Business Environment CASE STUDY (20 Marks) The European Union (EU) was the largest single market in the world. The idea of harmonizing the corporate tax rate, to further the goal of a single market that provides similar conditions to companies across national borders, has been floated in the EU for some time now but has not been acceptable to all the countries. As investment conditions within the EU become more homogenous, individual countries like Ireland have used tax competition as a means of differentiating themselves and attracting foreign investment. The expansion of the EU on May 1st 2004 has brought the issue back into the limelight. High tax member states like Germany have strongly argued for tax harmonization and a minimum corporate tax rate, while low tax member states like Ireland and the new EU members have opposed any such proposal

Answer the following question. Q1. Discuss the conflict of interest within the EU on the issue of corporate tax. Q2. Explain the merits and demerits of tax harmonization and tax competition