Many authors have interpreted the C

Many authors have interpreted the Community’s calls for tax harmonisation
(value added tax, corporate income tax, automobile tax) as instances of
tax collusion (see notably the formal analysis by Schwidrowski and Wahl
(1991)) but empirical applications of these public choice considerations are
still lacking.
The fact that, in spite of the unanimity requirement, there are large EC
transfers among the member countries has been attributed to altruism, the
need for side-payments and a demand for international insurance cover (e.g.,
Faber and Breyer, 1980). Many authors view the side payments as compensation
for damages from market integration. As there are doubts whether
market integration is harmful to any member country (see notably Peck
(1989)) the transfers may rather serve to bring about an even distribution of
the gains from cooperation (see Section 2.2 above). Insurance cover through
intergovernmental transfers is more likely to be desired by national politicians
than by individual citizens who otherwise could voluntarily insure
themselves (Brennan and Buchanan, 1980, p. 185). Since EC insurance
creates moral hazard in the individual member countries, Persson and
Tabellini (1992) call for the centralization of all policy instruments that can
be used to prevent damage. They do not consider the possibility of making
transfers conditional upon performance because they postulate imperfect
information with respect to national (rather than EC) policies.