Document Type

Article

Disciplines

International Law

Abstract

The European Council in Lisbon in March 2000 established a new strategic goal for the European Union, namely "[t]o become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion."' This overall objective places strong emphasis on the need to achieve economically sound taxation systems that contribute to the smooth operation of the Internal Market and, in addition, on the need to increase the competitiveness of European companies.2 Harmonization of accounting standards can also play an important role in achieving the Lisbon objective, as harmonization of accounting standards would help to create a "level-playing field" in which it would be much easier for companies all over the world to compete more equally against each other for financing.

The introduction of the European Monetary Union and the introduction of a single currency have placed even more emphasis on the achievement of the Lisbon objectives. With the introduction of the European Monetary Union, a substantial removal of macroeconomic differences has taken place.4 The implications of one single currency are as follows: one exchange rate, a unified monetary policy by the European Central Bank and a coordination of budgetary policy.5 The crucial question resulting from this development is what happens to the remaining microeconomic differences between Member States.6 Among these differences are accounting standards and taxes, in particular corporate income taxes.7 The harmonization of macroeconomic factors through the introduction of the European Monetary Union has made the problematic nature of remaining differences in accounting standards and taxes among European Union (EU) Member States more visible.

The existing differences of corporate tax systems and accounting standards among Member States and the recent proposals of the European Commission addressing the harmonization in each of these areas lead to the question of whether harmonization in those areas can be achieved separately, or whether there is an interrelationship between taxation and accounting standards that has to be taken into account in the process of harmonization. This Paper proceeds as follows: Section II describes the development of corporate tax harmonization in the European Community. Section II then considers the development of the harmonization of accounting standards in the European Community. Finally, Section IV analyzes the interrelationship between tax harmonization and the harmonization of accounting standards.

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