Reconsidering the EU Tax Policy to Ensure the Establishment and Functioning of the Internal Market and to Avoid Identification of Competition

Abstract

Tax policy is the sovereign attribute of the Member States, the legal framework established by the Treaty on the Functioning of the EU (TFEU) in the content of Articles 110-113. Therefore, the EU's competence is limited, its intervention being allowed within a well-defined framework only exceptionally whenever there is an imminent risk of tax fraud that seriously affects the EU's commercial interests, or the constitutive elements of tax avoidance practices are outlined, or competition is concerned. On the other hand, customs duties are established by the EU's standard commercial policy and influence competitiveness in the single market and international trade terms. Although customs duties are indirect taxes, along with excise duties, value-added tax and other categories of taxes and surcharges, only customs duties are the exclusive attribute of the EU, influencing how different categories of taxes are established and calculated, which are, in fact,, the prerogative of the Member States. Even though legislative harmonisation also in matters of tax policy is enshrined in the text of the TFEU in the context of Articles 114-118, in practice, the Member States have not managed to approximate their national legislations with the risk of serious problems of distortion of competition and the establishment of the EU budget, according to the procedure adopted by Article 314 of the TFEU. This study analyses how the forms of enhanced cooperation established by Articles 326-334 of the TFEU could represent the key to unblocking negotiations between Member States and the mechanism through which tax policy could be rethought in terms of more efficient functioning of the internal market and to avoid distortion of competition.