Giovannini and Hines' paper (GH) is divided into three broad sections: (i) a discussion of the differences in the average burden of capital income taxes in Europe and the United States; (ii) an overview and evaluation of the corporate and personal income tax systems in the various countries in the European Community; (iii) a series of reform proposals and more general considerations on the desirability of corporate income taxation. My comments will be subdivided accordingly but will not address the issue of the desirability of a corporate tax.

The historical experience

GH start from the observation that the ratio of capital income taxes to GDP has been lower in the 12 EC countries taken together than in the United States although the ratio of total tax revenues to GDP is higher in Europe. In Germany, the major EC country, the tax revenue from capital income and wealth taxes is only a fraction of the amount levied in the United States. Unfortunately the authors have been unable to disentangle the proportion of capital income taxes paid by the corporate sector from that paid by individuals. Nor have they taken account of transfers by the government sector to industry or of the reduction in tax revenue resulting from savings incentives. If such diverse elements were excluded from the taxes on capital income recorded by the authors, the differences between the United States and Europe and across European countries would probably be even more pronounced.