Why the Republic of San Marino should not join the EU

Draft #1

(no introduction yet)

San Marino is a very nice place to live, especially when it comes to taxes. Slowly, however, it adapts customary tax systems and in 2009 San Marino was even removed from the OECD list of official tax havens because of that. However, there are still many benefits for citizens of San Marino. The corporate tax and the taxes on interest earnings are relatively low. The income tax is particularly low with about one third of the average EU level. That means that if San Marino does not alter its tax system again, its citizens can still benefit from a very profitable taxing system.

San Marino has been using the Euro since it was introduced in 2002, even though it is neither member of the EU nor part of the Euro zone. This is due to a monetary agreement it has concluded with the EU. In 1998 the agreement was signed by San Marino and Italy, which represented the European Union. It gives the microstate the right to use the Euro and even to mint its own coins, with its own statal design. However, San Marino is not allowed to issue Euro banknotes and the annual maximum amount of money that can be produced is regulated by the EU. These regulations are being renegotiated every year in order to correct some shortcomings in implementation. Prior to the introduction of the Euro as a common currency in the EU, San Marino had a bilateral agreement with Italy, which entitled it to the use of the Italian lira. This illustrates that San Marino has a long history of using the same currency as Italy and its limited volume of self-issued coins seems to suffice for its main purpose.

The euro in San Marino, however, does not only serve as a currency but adds to the income of the microstate. As San Marino is allowed to mint just a limited number of coins, they are very rare and greatly demanded. This is why the coins are sold all over San Marino above their real value and are one of the main factors for the economy. Another important source of income are the San Marino postage stamps as their are very rare, as well. If San Marino joined the EU, they would be allowed to mint more coins and therefore the coins’ value and rareness would decrease. As this is not the case, the coins and stamps are sold mostly to tourists who are visiting San Marino and contributing over 2,2% to San marino’s GDP. So, it depends deeply on tourists crossing their borders.

This is possible because there are no border controls between San Marino and Italy, even though San Marino is not part of the Schengen Agreement. The microstate has entered several bilateral agreements with Italy, including an agreement on the free movement of persons allowing San Marino nationals to work and reside in Italy. Therefore, it is not in the Schengen area de jure but it is considered to be part of it de facto. San Marino has shown openness to consider various options for closer integration with the EU, among it even the consideration of joining the EU. On the 20th of October 2011, the citizens of this microstate voted for or against initial accession discussions. 49.7% voted for “no”, whereas 50.3 % were in favour. San Marino’s citizens have two major issues with the state joining the EU. Firstly, they fear that the Republic’s voice could be ignored by the greater EU states. Moreover, accession would mean the Republic would have to open its borders to 500 million EU citizens. This would harm its highly developed welfare system.

Joining the EU would bring very little benefits for San Marino. The state has a very beneficial taxing system and they already profit from the common currency, even though it is not part of the EU. Tourists can enter the country without border controls just like in the Schengen area and they can even make money by selling their coins/currency. Joining the EU would make them fulfill more requirements and would throw the economy and the welfare system out of balance.

With consideration of the other group's feedback, we corrected a few content problems in our text. Then we changed a lot in terms of language, linking and order of paragraphs: 

Draft #2

This essay addresses various reasons why it would not beneficial for San Marino to join the EU. The Republic of San Marino, a landlocked microstate of 32.000 people in Northern Italy, has expressed the interest for more integration in the EU and even a referendum was held. However, joining the EU would bring about negative consequences, which will be explored in this essay.

San Marino is a has many advantages for its inhabitants, especially when it comes to paying taxes. However, it is slowly adapting customary tax systems and consequently was removed from the OECD list of official tax havens in 2009. There are still many benefits for citizens of San Marino as the corporate tax and the taxes on interest earnings are relatively low. The income tax is particularly low with about one third of the average EU level. If San Marino joined the EU, it would have to adjust its taxing system to the EU requirements, which are even stricter. In short, the tax situation is more advantageous for San Marino if it does not join the EU.

San Marino has been using the euro since it was introduced in 2002, even though it is neither member of the EU nor part of the euro zone. This is due to a monetary agreement it has concluded with the EU. In 1998 the agreement was signed by San Marino and Italy, in which Italy represented the European Union. It gives the microstate the right to use the euro and even to mint its own coins with its own statal design. However, San Marino is not allowed to issue euro banknotes and the annual maximum amount of money that can be produced, is regulated by the EU. These regulations are being renegotiated every year in order to correct shortcomings in implementation. Prior to the introduction of the euro as a common currency in the EU, San Marino had a bilateral agreement with Italy, which entitled it to the use of the Italian lira. This illustrates that San Marino has a long history of using the same currency as Italy and that becoming a member of the EU would not bring significant advantages for San Marino.

The euro in San Marino, however, does not only serve as a currency but contributes to the income of the microstate. San Marino Euro coins are very rare and greatly demanded because of its limited amount. This is why the coins are sold all over San Marino above their real value and are one of the main factors for the economy. Another important source of income are the San Marino postage stamps as their are very rare as well. If San Marino joined the EU, they would be allowed to mint more coins and therefore the coins’ value would decrease. Since the coins and stamps are still valuable now, they are sold to tourists who are visiting San Marino and contributing over 2,2% to San Marino’s GDP.

Another important aspect of San Marino's income is tourism. There are no border controls between San Marino and Italy, even though San Marino is not part of the Schengen Agreement. The microstate has entered several bilateral agreements with Italy, including an agreement on the free movement of persons allowing San Marino nationals to work and reside in Italy. Therefore, it is not in the Schengen area de jure but it is considered to be part of it de facto and would not draw advantages from actually joining the EU as far as travelling is concerned.

Closer EU integration is a highly controversial topic in San Marino. Even if there are no real borders between San Marino and Italy, the state has shown openness to consider closer integration with the EU, among it even joining the EU. On the 20th of October 2011, the citizens of the microstate voted whether or not to initiate accession discussions. 49.7% voted against it, whereas 50.3 % were in favour. Citizens, who opposed the accession, have two main arguments against joining the EU. Firstly, they fear that the Republic’s voice could be ignored by the greater EU states. Moreover, accession would mean that the Republic would have to open its borders to 500 million EU citizens. This would harm its highly developed welfare system.

Joining the EU would bring very little benefits for San Marino. The state has a very beneficial taxing system and they already profit from the common currency, even though it is not part of the EU. Tourists can enter the country without border controls just like in the Schengen area and San Marino can even make money by selling their coins. By joining the EU, more requirements would have to be fulfilled which could throw the economy and the welfare system out of balance.