ANALYSIS (vol.12.No.23) Further, given that the number of closely comparable liberalize exchanges of goods and services among companies in any given country for a given functional member states as far as possible by bution of comparable companies in our data below), the nating customs duties among member he goal of elimi and risk profile is limited or nonexistent(see the distri- n creating a customs union, with omparable companies will provide the most reliable arm's length range of results(and one that is consistent a eliminating quantitative restrictions (i.e, quotas with the OECd guidelines comparability requirements) ind measures having equivalent effect) to ensure the compared with country-specific comparables, which completely free movement of goods will often require less functional comparability to be The Treaty of Rome provided for completion of a common market over a transitional period of 12 years ending on 31 December 1969. However, its first goal, ll. The European Single the customs union was achieved in mid-1968 Market Initiative B. Further Harmonization in the eighties The economic question of whether profit results for rard the common mar tentially comparable third- party European com ket led the Community in the mid-1980s to consider a nies can produce statistically, similar, arm's-length more thorough approach to the objective of removing ranges esults is fundamentally dependent on the le- gal and political development process of the European trade barriers with more effective methods to create single market initiative. If the legal and political frame- internal market. This approach was primarily set out in the Commission's White Paper of June 1985, and incor work for European economic integration is still at an porated in the Treaty of Rome by the 1986 Single Euro- earty sansactioevelopment, or if there are still signifi- pean Act(SEA). The White Paper was appr 300 legisla- ved in n costs from intra-European trade, test- ng for Europe as one market for transfer pricing pur. by the European Council. It outlined about poses would not be reasonable Briefly reviewed below tive measures to accomplish the three main objectives, hich to eli the legal and political ean market integration proces a physical frontiers, by abolishing checks on goods The process of European economic integration has and persons at internal country borders een characterized by more than four decades of the et a technical frontiers, by removing the barriers of na fective removal of economic boundaries and market tional regulations on products and services, by harmo barriers.In addition, a political and institutional frame- nization or mutual recognition; and work to enhance nomic activities between the tax frontiers, by overcoming the obstacles created cross-border transactions has been implemented. A by differences in indirect taxes through the harmoniza brief review of the history of the European single mar tion or approximation of VaT rates and excise duty ket initiative supports the conclusion that the most sig The internal market was intended to create "an area nificant market impediments among EU member states W have been abolished, and that the foundation for an in of goods, persons, services and capital is ensu tegrated European market is already in place. B Moreover, it was accompanied by changes in the Com munity legislative system, designed to encourage adop A. Treaty of Rome of 1958 tion of the meas SEa became effective in 1987; its main objectives in which together with the European Atomic Energy Com market strongly supported an objective already set out munity(EAEC jointly referred to as the Treaties of n the original Treaties of Rome. By the deadline, most of the 1992 targets had been met: over 90 percent of the establish a common market based on four freedoms- legislative projects listed in the 1985 White Paper had freedom of movement of goods, persons, capital, and been ado services-and the gradual convergence of economic The Treaty on European Union, signed in Maastricht policies. The treaty was intended to eliminate trade bar in 1992, came into force in November 1993. By institut- riers among member states with the aim of increasing ing a European Union, the Maastricht Treaty marked a conomic prosperity and cont ributing to"an ever closer new step in the process of creat ting an ever- closer union union among the peoples of Europe, "as described by among the European economies. The Union was based the treaty s authors on the European Community, supported by policies and To achieve these objectives the Eec Treaty laid new forms of cooperation. According to the treaty, the down guiding principles and defined the framework for Communitys task is to promote a harmonious, bal the legislative activities of Community institutions anced and sustainable development of economic activi- These involved policies such as a common agricultural ties, a high level of employment, sustainable and nonin transport, and commercial policy. The common market, flationary growth, a high degree of competitiveness and the Treaty of Rome's main objective was intended to onvergence of economic performance, and economic and social cohesion among member states. The Com munity pursued these objectives by establishing a com This section is largely based on an EU history fact sheet mon market and by initiating a coordinated economic foundathttp://www.europarl.eu.intfacts and monetary policy TAX MANAGEMENT TRANSFER PRICING REPORT (SSN 1063-2069 ENA TAX 4-14-04