In this Communication, the Commission reiterated its belief that there is no need for an across the board harmonisation of Member States' tax systems. Provided that they respect EU rules, Member States are free to choose the tax systems that they consider most appropriate and according to their preferences. In addition, any proposal for EU action in the tax field needs to take account of the principles of subsidiarity and proportionality. There should only be action at EU level where action by individual Member States could not provide an effective solution. In fact, many tax problems simply require better co-ordination (see COM/2006/823EN••• of 19.12.2006) of national policies.


Why does the EU believe that there's no need for an across the board harmonisation of member states' tax systems? I am wondering, because I thought countries could take advantage of the freedom to set their own tax system to become more competitive than the other EU states. What was the official reason given for this opinion?

  • 6
    An "across the board harmonisation" of tax systems wouldn't even be in the EU's powers. While the EU has some competency, tax systems are primarily a national competence. VAT is a notable exception, but even there the rates are not harmonized.
    – MSalters
    Aug 14, 2023 at 10:38
  • 7
    There's plenty of people that already feel like EU is interfering too much in their lives (for example see: Brexit). If something like this was even proposed, there'd be riots. :P
    – Vilx-
    Aug 14, 2023 at 12:17
  • countries could take advantage of the freedom to set their own tax system to become more competitive - there is nothing wrong with this. If a country feel they need to become competitive they would compete. In general citizens prefer if a country try to be more competitive and tax less, it is in the people's interest. Also, there are plenty of examples of countries with non-uniform state taxes that work including the USA, India etc. In fact, some EU countries practice tax disharmony between states eg. property tax in France
    – slebetman
    Aug 15, 2023 at 2:04
  • 10
    The US has managed to avoid harmonising state taxes for 250 years...
    – Rich
    Aug 15, 2023 at 2:10
  • 3
    Generally it seems that the EU would prefer to focus on actually achievable goals.
    – Jon Custer
    Aug 15, 2023 at 13:21

6 Answers 6


This is due to the principle of subsidiarity

When applied in the context of the EU, the principle of subsidiarity serves to regulate the exercise of the Union’s non-exclusive powers. It rules out Union intervention when an issue can be dealt with effectively by Member States themselves at central, regional or local level.

Member states can effectively collect their own taxes, so the EU is not allowed to intervene.

One could quibble about the meaning of "effectively", but no member state would admit they are bad at collecting taxes, and a central tax system is something that would need to be decided unanimously.

Apart from that, nobody would want to cede that much sovereignty; it is politically not feasible, independently from the question if it would be beneficial or not.

  • 4
    This begs the question. Whether the issue can be dealt with effectively by Member states themselves is exactly the point of the position expressed by the Commission. Also harmonisation does not mean a central tax system or the EU collecting taxes itself, cf. VAT or customs duty.
    – Relaxed
    Aug 14, 2023 at 19:43
  • 1
    @Relaxed it's so rare that the phrase is used correctly! Also you are of course right. Not sure what I was thinking. Aug 15, 2023 at 8:29

Historically speaking, taxes are a major subject of social strife. For as long as we have reliable records, social groups have attempted to both benefit from taxes and exempt themselves from as many of them as possible.

The historical background of the various European nations led to very different outcomes in each of them. While England had early participation in tax decisions and the parliament found ways for people to actually agree on being taxed, France had a more serious struggle that culminated in offices for sale, aristocratic rent-seeking in the extreme and, finally, the French Revolution. Germany, due to its late consolidation as a nation, had very different forces at work than Spain or the Netherlands.

That is to say: Taxes and tax systems represent social groups' interests and those powerful enough to put them up in the first place are also typically powerful enough to resist changing them. Just witness the discussions around finance market transaction taxes, which are generally considered to be useful and necessary, but which have been "under discussion", officially because getting the details right is so important, for about two decades.

Harmonizing taxes EU-wide would mean going against those entrenched interests as no matter what you come up with, there'll be tax exemptions, special rules or other hard-fought-over gains in one or more countries. That would have been a considerable road-block in the formation of the EU, and may have prevented it entirely. So leaving things largely untouched was the compromise necessary to prevent resistance from powerful, entrenched groups with considerable soft and hard power.

  • 3
    In other words, local grifters wouldn't want to compete with EU-wide grifters for who can hoard the most taxpayer dollars into their pocket. Aug 14, 2023 at 18:49
  • 2
    finance market transaction taxes, which are generally considered to be useful and necessary By whom? Citation needed.
    – user76284
    Aug 14, 2023 at 23:09
  • 1
    @user76284: In the EU context, that would be the European Union financial transaction tax (EUFTT), first proposed in 2011. Wikipedia has decent coverage. They're definitely not necessary, and do hurt economic growth via increased capital costs.
    – MSalters
    Aug 15, 2023 at 7:24


Why does the EU believe that there's no need for an across the board harmnonisation of member states' tax systems?

Short Answer:

The EU doesn't believe it's current tax system is ideal, it's rather what they could agree upon. The EU is a compromise between what was and what could be. Good compromises mean both sides are unhappy. Taxes are just one sub-optimal solution which exists.


There are huge economic, foreign policy, and security advantages for European member states in associating themselves in one large Union. There are also huge obstacles in subjugating millennia of member state's individual practices, nationalisms and histories. The easiest path to achieve the desired benefits is a compromise between these two forces and that is what we have. When the member states become more acclimatized to their association, they will become more aware some of the compromises made work against the full realization of the potential benefits. When that occurs they will likely revisit their original choices, or maybe they won't. The United States faced this same crossroads (Articles of Confederation vs Constitution ). Yet the United States faced a mere fraction of the systemic, cultural, and political hurdles Europe has faced in forming a union.


Why does the EU believe that there's no need for an across the board harmonisation of member states' tax systems?

This webpage reflects the position of the EU Commission, not the EU as whole. And the Commission knows there is absolutely zero chance of anything close to harmonisation happening and also that it is not within its remit to push for it. So by restating that there is “no need for an across the board harmonisation”, they are really trying to justify some more modest goals: coordination and “elimination of tax obstacles to all forms of cross-border economic activity”, which could lead to some partial or minimum harmonisation. For even that is far from easy or consensual.

Case in point, further down the page you can read that

The Commission, in its opinion to the Convention on the future of Europe (COM(2003) 548 final), expressed the belief that retaining unanimity for all taxation decisions makes it difficult to achieve the level of tax co-ordination necessary for Europe and made proposals for a move to qualified majority voting in certain tax areas. However, Member States did not agree to these qualified majority voting proposals.

The subject is super-sensitive, the Commission already tried and failed to go further (20 years ago) and really needs to reassure member states if it wants to achieve anything in this area.

  • 1
    Indeed, there is probably more tax harmonization in the E.U. than there is in the U.S., even though it isn't "across the board."
    – ohwilleke
    Aug 14, 2023 at 20:06
  • 4
    Tax harmonization isn't about funding the E.U. It is about promoting compatible domestic tax regimes for the the member states' own revenue raising. The E.U. doesn't do much of that, but it does do a little (mostly re VAT and corporate double taxation) and what it does is more vigorous than what the U.S. does to harmonize state and local taxes (although the U.S. central government doesn't do zero either). See en.wikipedia.org/wiki/Tax_harmonization#Tax_harmonization_in_EU
    – ohwilleke
    Aug 14, 2023 at 21:42

Not sure about the EU's current take on things. However, aiming for EU corporate tax homogenization has been a long term goal of France, which the UK for one resolutely opposed when it was a member. If I had to guess, I'd say the Netherlands probably have taken up the mantle of countering Franco-Southern drives for homogenization.

A country that has chosen the high tax route gains revenue. But it may also lose in economic activity in that country and make less competitive. By homogenizing it keeps the revenue but avoids the relative loss of competitiveness.

Whereas, if you are a country that, for good or bad reasons, has decided to have relatively low corporate tax rates, you may object to getting your domestic economic policy being imposed upon by other countries running the "wrong policy".

Hence the call to respect the subsidiarity principle.

the principle of subsidiarity seeks to safeguard the ability of the Member States to take decisions and action and authorises intervention by the Union when the objectives of an action cannot be sufficiently achieved by the Member States, but can be better achieved at Union level, ‘by reason of the scale and effects of the proposed action’. The purpose of including a reference to the principle in the EU Treaties is also to ensure that powers are exercised as close to the citizen as possible

(none of this should be construed as supporting tax havens or corporate tax avoidance by fictitious accounting manipulation - only to taxes levied for goods and services on a country's territory)


I believe such harmonization is not done because the costs of introducing it outweigh the benefits, not because it cannot be done. The principle of subsidiarity does exist, but it's not something that could not be worked around. Pro-harmonization countries could vote to make tax harmonization a necessary condition for the single market agreement, or establish a new agreement if the existing one cannot be legally amended. For example,

  • "state subsidies for electric cars / solar panels / etc. only apply to products from states which have joined the tax harmonization"
  • "stock market products are eligible for tax reductions if they invest exclusively in companies from states which have joined the tax harmonization"
  • etc.

I'm pretty sure such scenarios have been evaluated and it turned out the expected benefit would not justify the risk of yet another "Brexit".

  • That does not seem to reflect the actual dynamics within the EU. Also creating such a single market within the single market would be blatantly illegal and almost unworkable.
    – Relaxed
    Aug 16, 2023 at 14:11
  • @Relaxed I'm not saying it's a good idea, but how could concluding/updating an agreement be blatantly illegal? In the worst case countries willing to join "single market 2.0" could exit the current single market agreement. And what's illegal about countries deciding on e.g. subsidies or tax reductions? They would in turn be protected by the principle of subsidiarity, right? Aug 17, 2023 at 7:47
  • It would be blatantly illegal because not doing that is fundamental to the architecture of the EU, as defined by its treaties (accepted as legally binding by its member states) and enforced by its institutions (from the Commission to the EUCJ). You will note that even troublemakers like Hungary tread very carefully in these matters. Of course, you can do that (e.g. Brexit) and you could imagine some rogue countries flouting the treaties and testing how far they can go but it means nothing else than destroying the EU. If you leave the single market, there is no EU anymore, plain and simple.
    – Relaxed
    Aug 17, 2023 at 11:59
  • And yes subsidies or tax reductions to businesses are in fact strictly regulated (cf. “state aid”), the subsidiarity principle is a vague principle that's supposed to preside over the development of EU law, not an invitation to ignore it once it's enacted.
    – Relaxed
    Aug 17, 2023 at 12:00

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