Battle of the Classics: A study on the explanatory power of Neofunctionalist and Liberal Intergovernmentalist theory in regards to the unexploited potential of the Single Market.

Theories on European integration postulate what actors, processes and developments are central to the construction and functioning of the EU. Therefore, such theorization of integration can be used to explain, clarify and justify specific events. This thesis draws on the authentic arguments and assumptions of Neofunctionalism and Liberal Intergovernmentalism, i.e. two classic integration theories, to test their explanatory power by means of a case study. The context in which this study takes place is the completion of the Single Market, the barriers thereto and the subsequent potential of the Single Market that is left unexploited. One such barrier is the existence of different corporate tax regimes in and across the Single Market. The case used in this study is the proposed legislation on a Common (Consolidated) Corporate Tax Base (C(C)CTB), which is aimed at addressing this issue and to eliminate the negative consequences of tax regime disparities. The research question that...Show moreTheories on European integration postulate what actors, processes and developments are central to the construction and functioning of the EU. Therefore, such theorization of integration can be used to explain, clarify and justify specific events. This thesis draws on the authentic arguments and assumptions of Neofunctionalism and Liberal Intergovernmentalism, i.e. two classic integration theories, to test their explanatory power by means of a case study. The context in which this study takes place is the completion of the Single Market, the barriers thereto and the subsequent potential of the Single Market that is left unexploited. One such barrier is the existence of different corporate tax regimes in and across the Single Market. The case used in this study is the proposed legislation on a Common (Consolidated) Corporate Tax Base (C(C)CTB), which is aimed at addressing this issue and to eliminate the negative consequences of tax regime disparities. The research question that guides this thesis is as follows: ‘to what extent can Neofunctionalist and/or Liberal Intergovernmentalist theory explain the proposed legislation on a Common (Consolidated) Corporate Tax Base and associated processes and developments?’ In pursuance of rejecting the null hypothesis and supporting one of the three alternative hypotheses, this study derived six ‘expectations’ from both integration theories to assess their compatibility with what can be observed in practice. Subsequently, the theory with the most accurate presumptions, measured by the degree of compliance, is assumed to hold most explanatory power and, consequently, ‘wins this battle’. The data used for this study is composed of desk and field research, including but not limited to interviews with the European Commission, KPMG EU Tax Centre and the Permanent Representation of the Netherlands in Brussels. With an average score of 4.2 against 2.2 (on a five-point scale), the outcome of the data analysis clearly indicates that the expectations derived from Neofunctionalist theory are significantly better capable of explaining relevant processes and developments underlying the C(C)CTB. Therefore, this study concludes that Neofunctionalism in this case holds more explanatory power than Liberal Intergovernmentalism. Nevertheless, it is acknowledged that due to low external validity the results of this study cannot or to a very limited extent be generalized to other situations. Accordingly, further research, for which this thesis could provide a methodological blueprint, is required to assess the explanatory power of both integration theories in regards to other issues that constitute barriers to the Single Market. Thereafter, it may be verified whether the findings presented in this study do indeed hold and are as such applicable to the broader context in which this study is situated.Show less

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Battle of the Classics: A study on the explanatory power of Neofunctionalist and Liberal Intergovernmentalist theory in regards to the unexploited potential of the Single Market.