Reducing the costs of ‘non-Europe’ in taxation requires more – and better targeted – coordination across the EU

Tax policy in the EU is mostly decided by the Member States – 27 tax systems, each setting, collecting and administering taxes nationally. EU-level instruments do allow action in specific areas to safeguard the single market’s functioning, but today’s patchwork of rules and administrative practices still creates economic distortions and compliance frictions that directly impact taxpayers and firms.

The priority isn’t ‘hard law’ harmonisation for its own sake. Rather, it’s about getting national tax systems to work together across borders. This is consistent with the broader call for systemic reforms (including in Enrico Letta’s report) to reduce cross-border frictions and strengthen the single market. 

Tackling fragmentation requires better cross-border coordination in strategic areas where inconsistent national approaches already warp how the market functions, notably wealth taxation, crypto-asset taxation, the digitalisation of tax administrations and the tax compliance burden.

Agustina Korenblit is Associate Researcher at CEPS. Apostolos Thomadakis is Head of Research at ECMI, and Senior Research Fellow and Head of the Financial Markets and Institutions Unit at CEPS. This commentary is based on the ‘The future of EU tax policy harmonisation: Cost of non-Europe report’ study, carried out by Apostolos Thomadakis, Theresa Bührle, Agustina Korenblit, Fredrik Andersson, Iain Begg and Katerina Pantazatou for the European Parliamentary Research Service (EPRS).