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Coordinating Taxation Between the European Union and Other Countries Through Advance Tax- Rulings Systems

Difficulties in interpreting and applying provisions of tax laws are present in every country. However, they constitute much more serious problems in cross-border situations where taxpayers face issues related to the compliance with foreign tax systems. These difficulties are additionally enhanced across the MENA region countries where the flow of information between tax administrations and taxpayers is not transparent or even present at the regional level and between these countries and the European Union. It is possible to recognize this problem as a general global one. Thus, a possible recommendation to address such difficulties in the academic and policy literature might be an introduction of binding tax rulings systems by regional or global international tax institutions. New tax challenges created through technological, economic, political and other developments especially in electronic commerce and Internet business necessitate the creation of new approaches in the field of taxation. Such new approaches are found in binding tax rulings systems properly defined by the authority. The interpretation and application of tax laws to a certain arrangement becomes binding on the revenue authority. The binding ruling system is necessary in current tax systems in view of their complexity. The presence of several rules governing various tax ruling systems in many countries constitute an obstacle in developing cross-border trade and investments. At the national level, binding rulings create a system of legal certainty for taxpayers. But divergences and dissimilarities in tax rulings across countries might be seen as obstacles in the realization of common markets. Thus, it is proposed to harmonize advance tax rulings systems in the European Union (EU). It is useful to mention that the EU already has some kind of such harmonized system in the area of customs duties. Such a regulation and practice serves as a confirmation that harmonized tax rulings systems in the EU are possible and ought to be envisaged. Moreover, such systems should be understood as one step forward to achieving general rulings systems at the global level in the framework of expected international and global tax harmonization. This chapter studies the functioning of the tax rulings systems in the EU and recommends the adoption of such systems in countries attempting to coordinate with the EU whether these countries are part of the Middle Eastern and North African region or represent other European countries such as Croatia. We recommend this harmonization among various groups by making the EU’s system of rules as part of national tax systems to achieve tax coordination. Advance ruling systems should be recognized as desirable instruments for achieving necessary changes in tax systems in many countries. Implementing advance ruling systems is condition sine qua non at the national but also at the regional levels for tax harmonization measures.

Advance tax rulig system, Advance pricing agreements, coordinating taxation, harmonisation

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