Part 1 - AL-Tax

International Taxation HandbookOnce it is clarified what we mean by tax problem, we can distinguish three differentlevels of evolutionary comparative analysis:●●●At the first level, there is a common core of corporate tax systems of EUcountries in relation to basic tax problems.At the second level, there is circulation of tax models among different EUcountries.At the third level, there is regulatory articulation of domestic corporate taxmechanisms, which are meant as a set of rules aiming to solve corporate taxproblems.In this section we will discuss these three levels.9.4.1 The first level: Basic tax problemsWe can identify a core of four corporate tax problems that are common to EUcountries: 71. Tax treatment of corporate distributions. Each EU country has to decidehow (and to what extent) to avoid double dividend taxation caused by theoverlapping of personal and corporate income taxes.2. Limitation on the deduction of interest expenses. Each EU country has todecide whether (and to what extent) interest payments and other financialcosts can be deducted.3. Tax treatment of corporate reorganizations. Each EU country has to decidewhether (and to what extent) gains/losses, resulting from transactionsrelating to assets or entities, trigger the recognition of taxable capital gainsor deductible capital losses.4. Consolidated corporate taxation. Each EU country has to decide whether(and to what extent) profits/losses of companies can be offset with profits/losses of companies belonging to the same group.Despite the fact that EU members share these basic features and form a single EUcorporate tax family, 8 the solutions so far adopted by each country have led toremarkable differences.9.4.2 The second level: The emergence of tax modelsThe second level of evolutionary comparative taxation is the development oftax models as responses to policy problems (as regards the emerging stream of220