The integration of European and South American markets tested by tax competition

• Author: Adriano Di Pietro
• Pages: 1-21

Studi Tributari Europei 1/2017

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The integration of European and South American markets

tested by tax competition *

Adriano Di Pietro1

National tax protections and the market integration

The integration of the markets and the economic freedoms within the

European Union represents a coherent and essential hendiadys.

Integrating the markets means, from the fiscal point of view, overcoming

the territorial limits to trade: those fixed by national jurisdictions with

controls on products at the borders, on financial investments, on industrial

or commercial investments and on the territorial delocalization of the

economic activities. National taxation had contributed to protect the

markets. It had done it and continues to do it. The tax choices are many,

depending on the economic areas in which the investments are made.

States can create custom duties to increase the tax cost of the imported

products in order to protect those goods which are produced and exchanged

on the territory. States can penalize financial investments abroad with

differentiated and more onerous tax systems in respect of those within their

territories. States can incentivate industrial or commercial investments

which entail settlements in the national territory as well as they discourage

national non investments due to the delocalization of activities out of the

national territory.

These national protections now have lost their primacy. Their role has been

reduced while the national European markets integrated themselves in

order to create what has been defined, since the Tr eat y o f R ome , a fre e

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* How to quote this article: A. DI PIETRO, The integration of European and South American

markets tested by tax competition, translated by ALESSIA FIDELANGELI, University of Bologna,

in Studi Tributari Europei, n. 1/2017 (ste.unibo.it), pp 1-21, DOI: 10.6092/issn.2036-

3583/8845.

1 Adriano Di Pietro, Director of Studi Trib uta ri E ur ope i, Form er Professor of Tax Law at the

University of Bologna. !

Studi Tributari Europei 1/2017

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© Copyright Seast – Tutt i i d iri tti ri se rva ti!

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trade area with the same conditions of competition. This was, in 1957, for

the States that created the European Economic Community, a choice of

economical convenience and usefulness: both were national and were

thought to acquire an economic space within which to freely operate in

trade. In fact, these exchanges, subtracted from the national competition,

would have contributed to reinforce the national economies, thanks to the

free movements that would have amounted to an important corollary of the

national choices concerning the economic policy. At the same time, a

common market, as the one which had been imagined, would have

permitted to the States to better react to the protectionist policies which

emphasized and emphasize the hegemonic role of the strongest economies.

The European Union teaches that the effectiveness of the tax protections in

defense of national markets depends on their degree of integration. This has

required to the States a political effort that lasted more than ten years and

increased as long as the States became aware of the advantages that the

national economies would have had from a Common Market. With its

creation and consolidation the reasons for national fiscal protections would

have expired; on the contrary, their permanence would have amounted to

an obstacle to the full development of the European market, when the

national regimes would have restricted the economic freedoms.

The difficult integration of the markets in Latin America between

free trade areas and custom unions

To le av e th e nat io na l ta x pr ot ec ti on s to c re ate a c om mon m ar ket th at wo ul d

have been controlled by the primacy of a legal regime such as the European

one, would have required a political responsibility which is too high for the

countries of South America whose economic, political and cultural difficulties

were known. However, everyone, small and big countries of the american

continent, could not face alone the success of a national economy that

found out of the national borders the reasons of its development and

affirmation. The same reasons that induced many States of the continent to

look for forms of integration of their markets. In this way, even though with

different accents, they could have exchanged freely their goods or services.