Hi, and welcome to module five of our course, rethinking international tax law. In this module, we will be looking at the EU law aspects related to corporate international tax planning. The subject for this module is a step away from the work that we did during modules two, three, and four. Wherein each module, we learned about corporate and international tax aspects and used the knowledge gained to get a better understanding of how international tax planning works in tax structures of multinationals. In this module we will look at the developments in the area of corporate tax planning within the European Union, or EU. Focusing on recent developments and the actions which have been taken within the EU to ensure that international tax planning of multinationals does not negatively affect corporate taxation within its territory. Also, we will speak about the limits which EU law places on domestic and international measures to counter aggressive tax planning and base erosion and profit shifting. These limits arise from the case law of the EU's Court of Justice. Notably, with respect to the rules on free movement within the EU's internal market. My choice to focus on the developments within the European Union, rather than on developments in individual countries or actions taken by other intra, or inter-governmental organizations is not arbitrary. The debate on international tax planning within the European Union, has seen some very high profile developments in the last few years. For example, when Luxembourg tax rulings were leaked to the media, LuxLeaks. And as we saw in module one, when the UK public accounts committee interviewed representatives of Google, Starbucks, and Amazon. Also, as we will see in videos three and four, the European Union, in particular, the European Commission, is increasingly taking action against state aid measures of countries within the European Union. I think these developments are interesting to all participants of the course, whether you live in the European Union, or not. Before we discuss the developments in the European Union, in relation to international tax planning however, I would first like to take time in this video to provide you with some background, in relation to the European Union and corporate taxes. A good understand of the workings of the European Union is crucial to understanding the European Union's role and actions, with respect to tax planning. I will address questions such as, what is the European Union? What are the goals of the European Union? Where does the European Union stand in relation to international corporate taxes? What European Union institutions are important in relation to international corporate taxes. Throughout this module I will refer to EU legislation and the case-law of the EU's Court of Justice. For your review, I have collected all materials referenced on our course page. In short, the European Union is an economic and political partnership between, currently, 28 countries, which are generally referred to as the EU member states. The first steps towards the European Union as it exists today were taken at the end of the second World War. At first, the founding six countries strived for an economic cooperation in certain areas to avoid future conflict. To which effect, the countries France, Germany, and Italy concluded the Treaty of Rome in 1957. The economic cooperation has since developed into an internal market. Within the internal market, the European Union strives to realize free movement of goods, services, persons and capital. These are also referred to as the four freedoms. Also, the European Union strives to achieve normal conditions for competition, what is also called a level playing field. And harmonization of national law, in so far as it hinders the functioning of the internal markets. In 1993, the economic cooperation took on a political and monetary dimension when the Maastricht Treaty entered into force, and the European Union and Euro are created. The European Union operates through its institutions. It goes beyond the scope of this video to discuss all institutions here, but the webpage of the EU offers a good overview. I've included a link on our course page for easy reference. For the purposes of our course, the following institutions should be mentioned here. First, the Council of the European Union, or EU Council, is the institution representing governments of the EU member states. In the EU council, national ministers from each country within the EU, meet to adopt laws and coordinate policies. The EU council is divided into several different configurations, based on policy areas. For our purposes, the Economic and Financial Affairs Configuration, Ecofin, is most important. The Ecofin is composed of the Economic Finance Ministers of the EU member states. Secondly, the European Commission is the executive body of the European Union. The European Commission represents and upholds the interests of the European Union as a whole. It's responsible for proposing and drafting legislation and manages the day-to-day business of implementing EU policies and spending EU funds. The members of the European Commission are 28 in total, one from each member state. For purposes of this course, the commissioners for taxation and competition are particularly important. Currently, the posts are held by Pierre Moscovici, a French national, and Margrethe Vestager, a Danish national, respectively. Finally, the Court of Justice of the European Union, is the highest court in the EU, in matters of EU law. Tax policy in the European Union falls into two categories. First, the area of indirect taxation, which has been harmonized to a large extent. And secondly, the area of direct taxation, which remains almost the sole responsibility of the member states. In this respect, the EU strives to implement the consolidated corporate tax base to address the underlying tax obstacles which exist for companies operating in more than one member state. Yet, the creation of directives and regulations in the area of direct taxation is, in principle, subject to a unanimous approval of all member states. In this regard, I refer to article 114 paragraph 2, and article 115 of the Treaty on the Functioning of the European Union. As a result of lack of consensus, harmonization through statutory instruments, so-called, positive harmonization, in the area of direct taxation has been limited. Some steps for positive harmonization within the EU have been taken though. For purposes of our course, I mentioned the following directives. First, the parent-subsidiary directive, which seeks to abolish withholding facts of outgoing payments, and to prevent economic double taxation within an EU based corporate group structure. Secondly, the merger directive seeks to facilitate tax neutral corporate mergers, divisions, transfers of shares and exchanges of shares between EU based companies. Thirdly, the interest and royalty directive seeks to abolish withholding tax on intra-group interest and royalty payments. In light of the limited positive harmonization measures, the EU Court of Justice has over the past decades taken a leading role of developing the internal market from a direct tax perspective based on so-called, negative integration by prohibiting member states, tax provisions, which are contrary to internal market principles of the EU. In particular, the four freedoms, which I mentioned earlier. In this video, we discuss the basics of the European Union. In particular, in relation to corporate tax. For those of you who are particularly interested in this subject, I included a suggested reading list on our course page. In the next video, we will look at the actions which the European Union has taken so far to address international corporate tax planning.