A history of the ‘tax package’: The principles and issues underlying the community approach.

This article presents an overview of the EU "Tax Package", comprising the Code of Conduct for business taxation, the Directive on taxation of savings income and the Directive on taxation of interest and royalty payments. Its main objective is to offer a comprehensive view of the negotiation process, and a broad overview of the content
of the package, as well as pending policy issues. This then allows drawing a number of lessons concerning the approach followed and the outlook for future European initiatives on direct taxation.

An agreement on the Tax Package was obtained in June 2003 following several years of intense negotiation between the EU Member States. This outcome was attributable to an innovative tax strategy, which involved bundling a number of sensitive issues so that every Member State could be an overall winner.

The negotiations on the Tax Package highlighted the global dimension of tax issues. It could never have been concluded without the agreement of certain key third countries and dependent or associated territories of Member States. The tax debate thereby led to discussions on other aspects of the EU’s relations with the countries or territories
concerned. Were action against harmful practices to be stepped up in the future, the EU’s Member States and institutions might consider explicitly linking the abolition of harmful tax practices to other issues.

Looking beyond the Tax Package, the EU will have to make a number of strategic choices in tax matters. The Community’s field of intervention in matters of harmful tax competition could for instance be expanded to encompass additional forms of competition to those covered by the Tax Package.
Decision-making processes and 'institutions' are also an important issue. In particular, an issue is whether to foster the existence of a loose negotiating structure
based on a body of high-level working groups or to try and integrate these working groups into a more stable and coherent framework such as a EU Tax Policy Committee.

The Tax Package has brought major advances in matters of tax policy at EU level. Besides stimulating thought and discussion on tax competition, it has raised awareness among the Member States of the interdependence of their tax policies and of the potential benefits of cooperation at EU level.