The EU'S Single Market: The Impact of a Failure to Harmonise Taxes


The European Union’s Single Market remains as one of the largest synchronized market ever formed among countries in a continent. In reference to Klug (2006, 63), some of the objective of establishing the European Union Single Market include among others; free movement of goods; free movement of services; free movement of persons; and free movement of capital. However, research indicates that the failure to harmonise taxes among member countries has impacted this market in a negative way. Therefore, this thesis proposal will examine the impact of failure to harmonise taxes on the European Union’s Single Market.


This proposal will focus mainly on research which has been carried out on European Union Single Market. Some of the major sources which would be utilized in this thesis will be drawn from a wide pool of journals, books and white papers which have been presented to the European Union Commission. More so, the ongoing research and progress on the harmonisation of taxes among the member states would play a vital role in contributing towards successful completion of this thesis.


There are three main objectives which will form the basis of this research. These are; why the European Union formed a single market, why taxes have not been harmonised and what problems could result from failure to harmonise these taxes.

Why did the European Union form Single Markets?

Notably, trade activities have existed in Europe for a very long period of time. However, it was noted there were certain factors which existed in these market that hindered effective trading. In line with this, the formation of the European Union played a critical role in laying a foundation to eliminate these barriers. As a result, the European Union’s single markets were formed with an aim of allowing free movement of goods and services among the member countries. This entailed removal of all existing trade-barriers to achieve a better allocation of production forces and creation of a synchronized business environment among these countries to allow for same conditions of doing business in these countries (Klug 2006; p.63). In addition, this market was formed to facilitate free movement of persons (labour) and capital (Klug 2006; p.64). In consistent with this, the barriers which restricted the movement of people and capital across these borders were eliminated. This thesis will therefore examine whether these objectives have been met and the progress that is being made in enhancing each objective.

Why Taxes have not been harmonised?

This thesis will also look at the major reasons that have contributed to the sluggish process in the harmonisation of taxes in the European Union’s single market. First, the fear which has been exhibited among member countries of the European Union in regard to the safety of their individual industries will be highlighted. In reference to Tsoukalis (1997; p.107), Britain and Luxembourg were strongly opposed, because of fears that tax harmonization and/or the abolition of banking secrecy would lead to loss of international business to other financial centres outside the European Union. In addition, taxes harmonisation is perceived as a threat to local capital and labour since the free movement of people would allow people to move to regions which are perceived to be more favourable as compared to their home countries. This is further worsened by fiscal barriers which exist among these nations (Commission of the European Communities 1985). Therefore, most European Union member fear loosing important labour and capital to other nations.

Problems Resulting from Failure to Harmonise Taxes

There are numerous problems which would be discussed as result of failure to harmonise taxes in the European Union’s market. To begin with, this paper will observe that failure to harmonise taxes has often resulted in eliminating fair competition among the markets which are involved (El-Agraa 2007). Apart from hindering competition, failure to harmonise taxes in the European Union’s single market has elevated some markets with fair tax policies while dwindling the opportunities of others. For instance, some markets are able to attract investment while others have failed to do so, thus creating unfair competition and imbalanced investment opportunities. This thesis will therefore also examine the implications of the failure of European Union’s member countries to their economies, especially in development to be at per with other members.


This thesis proposal will major on the impact of failure to harmonise taxes in the European Union’s single market. Consequently, it would propose or recommend on the issues which need to be streamlined in order to create this market. The underlying steps towards harmonisation of taxes would also be outlined in the recommendations.

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