Foral Tax Autonomy on Corporate Income Tax and European Harmonisation: Are They Compatible?

Although Spain is not a federal country, it is a heavily and asymmetrically decentralized EU member state. In fact, five different CIT coexist, contradicting the basics of the tax competition theory, but backed by empirics. The trend within the EU towards an increased fiscal integration, in order to complete the EMU and cope with multinational´s tax avoidance, requires as next step new efforts to harmonize taxation. This is what the CCCTB pursues. However, this phenomenon should consider its implications on regions, particularly when they hold competencies on taxation, in order to respect their historical sovereignty and ensure the legitimacy of the new policies. Tax harmonization on the field of corporate taxation is required, and CCCTB could be a good step, but without strong democratic participation of regions on the EU decision making processes new focuses of institutional instability will arise. This paper will look for a solution in order to make compatible foral tax autonomy on CIT with EU tax harmonization proposals by creating an improved regime for their participation in EU fora.