Snapshot

Legal bases, decision-making, DG TAXUD, international bodies, own resources and the current EU tax-policy agenda.

Module status

• •Track: Both fields
• •Corpus module: EU Tax Policy and Institutions
• •Last verified: 2026-07-31
• •Purpose: EPSO competition preparation; not legal or tax advice.

Treaty bases, institutions, procedures and external tax policy common to both fields. Verified 31 July 2026.

1. Legal bases and decision-making

Treaty framework

• •Art. 113 TFEU — harmonisation of indirect taxes (turnover taxes, excise duties, other indirect taxation) so far as necessary for the internal market and to avoid distortion of competition. Special legislative procedure: Council acts unanimously, after consulting the European Parliament and the EESC.
• •Art. 115 TFEU — approximation of laws directly affecting the internal market: the basis for all direct tax directives (ATAD, DACs, Pillar Two, etc.). Same procedure: unanimity, EP consulted only.
• •Art. 114(2) TFEU expressly excludes fiscal provisions from ordinary-procedure (QMV) internal-market harmonisation — taxation is one of the last unanimity domains.
• •Art. 110 TFEU — directly effective prohibition of discriminatory/protective internal taxation of other Member States' products (the constraint on non-harmonised taxes, e.g. car taxes).
• •Art. 116 TFEU — an unused alternative: ordinary legislative procedure (QMV) may address distortions of competition caused by divergent national rules. It has been discussed in tax policy but never used for tax legislation.
• •Art. 192(2) TFEU — environmental measures "primarily of a fiscal nature" also need unanimity (the Energy Taxation Directive problem); CBAM instead used Art. 192(1) ordinary procedure by design (framed as environmental, not fiscal).
• •Enhanced cooperation (Art. 20 TEU; Arts 326–334 TFEU, minimum nine states): tried once in tax — the Financial Transaction Tax (11 Member States authorised in 2013; Estonia left in 2016; proposal withdrawn in the Commission 2026 Work Programme). It did not produce adopted tax legislation.
• •Passerelle clauses: Art. 48(7) TEU (general — European Council unanimity + EP consent + 6-month national-parliament window) and Art. 192(2) (environment). Commission Communication COM(2019) 8 (15 Jan 2019) proposed a 4-step roadmap to QMV in tax by 2025 — rejected by smaller Member States; periodically revived rhetorically.
• •Principles: conferral, subsidiarity, proportionality (Art. 5 TEU; Protocol No 2 yellow card applies to tax proposals).

The pipeline of a tax file

1. The Commission, normally through DG TAXUD, presents the proposal.
2. The Council's Working Party on Tax Questions (WPTQ) examines the text in its direct-tax, indirect-tax or administrative-cooperation configuration. The High Level Working Party (HLWP) provides strategic direction.
3. Coreper II prepares the file for ministers.
4. The European Parliament gives a non-binding opinion through ECON, supported by its FISC Subcommittee.
5. ECOFIN adopts tax directives unanimously. It also approves the EU list and Code of Conduct Group conclusions.

The CJEU's role

"Negative integration": since C-279/93 Schumacker (1995) — direct taxation is Member State competence but must be exercised consistently with EU law. The Court polices the fundamental freedoms and Art. 110; the Commission polices State aid (Arts 107–108). See the CJEU Case-Law Compendium.

Sources and general principles of EU law in taxation

• •Hierarchy of sources: primary law (Treaties + Charter + general principles) → international agreements → secondary law (regulations — directly applicable; directives — binding as to result, transposed by Member States; decisions) → soft law (recommendations, Commission notices, Code of Conduct, VAT Committee guidelines — not binding but practically influential).
• •Primacy: EU law prevails over conflicting national law (Costa v ENEL); national courts must disapply conflicting tax rules.
• •Direct effect: sufficiently clear, precise and unconditional directive provisions can be invoked by taxpayers against the State after the transposition deadline (vertical effect — Becker, 8/81, a VAT exemption case); no inverse effect against taxpayers.
• •Effectiveness and equivalence: national procedures for EU-law-based tax claims (e.g. refunds of unduly levied tax) may not be less favourable than domestic equivalents nor make recovery practically impossible.
• •Legitimate expectations and legal certainty: protect taxpayers against, e.g., retroactive changes in harmonised areas.
• •Proportionality: restrictive national tax measures (and EU measures) must not exceed what is necessary — the recurring final step in freedoms and anti-abuse analysis.
• •Prohibition of abuse: a general principle of EU law — benefits of EU law cannot be claimed through abusive arrangements, applicable even without national implementing rules (Cussens; the Danish cases).

2. DG TAXUD

• •Mission: develops and manages EU policy on taxation and the customs union — fair, simple, fraud-proof taxation supporting the green/digital transitions and competitiveness.
• •Commissioner (2024–2029): Wopke Hoekstra (NL, EPP) — Climate, Net Zero and Clean Growth and Taxation (novel bundling of climate and tax; customs sits with EVP Maroš Šefčovič). Economic cluster coordinated by EVP Valdis Dombrovskis.
• •Director-General: Gerassimos Thomas (since 2020).
• •Structure — five directorates: A Customs; B Digital Delivery of Customs and Taxation Policies (trans-European IT systems: VIES, EMCS, DAC exchange systems); C Indirect Taxation and Tax Administration; D Direct Taxation, Tax Coordination, Economic Analysis and Evaluation; E International and General Affairs.
• •Manages the Fiscalis and Customs programmes directly (no executive agency for tax).

3. Code of Conduct Group (Business Taxation)

• •Code of Conduct for Business Taxation: ECOFIN resolution of 1 December 1997 ("Monti package"); Group established 9 March 1998. Soft law — political peer review, standstill and rollback of harmful tax measures.
• •Harmful-measure test: significantly lower effective taxation than the country's general level, assessed for ring-fencing, advantages without real economic activity/substance, departure from OECD profit-attribution principles, lack of transparency.
• •Revised mandate — ECOFIN 8 November 2022: scope extended from preferential regimes to "tax features of general application" creating double non-taxation or double/multiple use of benefits (features enacted from 1 Jan 2023; review of pre-existing features from 1 Jan 2024).
• •Also runs the third-country screening for the EU list. Chair elected for two years: María José Garde (ES) from 2022; Tina Humar (SI) elected 21 May 2026. Reports to ECOFIN every six months.

4. EU list of non-cooperative jurisdictions

• •Origin: 2016 External Strategy → first list 5 December 2017; updated twice yearly (February and October ECOFIN). Annex I = non-cooperative ("blacklist"); Annex II = jurisdictions with pending commitments ("grey list").
• •Three criteria pillars: (1) tax transparency — AEOI/CRS, EOIR with Global Forum rating at least "Largely Compliant", Multilateral Convention; (2) fair taxation — no harmful preferential regimes (criterion 2.1), no facilitation of offshore structures without real economic activity, incl. economic-substance requirements for zero/low-tax jurisdictions (criterion 2.2); (3) anti-BEPS — BEPS minimum standards, notably CbCR (criterion 3.2).
• •Process: Code of Conduct Group screens (~90+ jurisdictions chosen by economic ties, financial-sector weight, stability), obtains commitments; ECOFIN lists by consensus.
• •Defensive measures: EU funds cannot flow through Annex I entities; Member States apply at least one tax measure from the 2019 toolbox (cost non-deductibility, stricter CFC, WHT, participation-exemption limits) plus administrative measures. Legislative hooks: DAC6 hallmark C.1(b)(ii), public CbCR disaggregation.
• •State of play after the 17 February 2026 update — Annex I (10): American Samoa, Anguilla, Guam, Palau, Panama, Russia, Turks and Caicos Islands, US Virgin Islands, Vanuatu, Viet Nam (Viet Nam and Turks & Caicos added Feb 2026 for transparency failures; Fiji, Samoa, Trinidad and Tobago removed). Annex II (9): Belize, BVI, Brunei, Eswatini, Greenland, Jordan, Montenegro, Morocco, Türkiye. Next update: October 2026.

5. Tax good governance and the external dimension

• •Standard: transparency, exchange of information, fair taxation, anti-BEPS minimum standards — embedded via "good governance clauses" in EU agreements with third countries.
• •Key documents: External Strategy for Effective Taxation (2016); 15 July 2020 Tax Package (Action Plan of 25 measures, DAC7 proposal, Communication on Tax Good Governance COM(2020) 313); Business Taxation for the 21st Century (2021) — parent of BEFIT/DEBRA/Unshell.
• •Tax and development: "Collect More – Spend Better", domestic revenue mobilisation, Addis Tax Initiative, technical assistance to listed jurisdictions.
• •Platform for Tax Good Governance: Commission expert group (Member States + stakeholders) on external tax policy.
• •Bilateral: EU–Norway VAT cooperation agreement; October 2025 — negotiating directives for an EU–Norway agreement on direct-tax administrative cooperation.

6. International bodies

OECD/G20 BEPS and the Inclusive Framework

• •BEPS project (2013–2015), 15 actions; minimum standards = Action 5 (harmful practices), 6 (treaty abuse), 13 (CbCR), 14 (dispute resolution). EU transposition: ATAD I/II, DAC4, DAC6, Dispute Resolution Directive.
• •Inclusive Framework (2016, ~147 jurisdictions) — negotiated the Two-Pillar Solution (October 2021):
• •Pillar One (Amount A reallocation; MLC published Oct 2023, never signed by the US — effectively moribund; Amount B optional from 2025; DSTs persist).
• •Pillar Two (GloBE 15% minimum tax) — EU: Directive (EU) 2022/2523. US "side-by-side" accommodation: G7 statement 28 June 2025 → Inclusive Framework package 5 January 2026 exempting qualifying US-parented groups from IIR/UTPR while QDMTTs remain applicable. Its interaction with the EU directive is a central implementation question.
• •Global Forum on Transparency and EOI (~171 members): EOIR peer-review ratings and AEOI monitoring — feed directly into EU-list criterion 1.

United Nations

• •UN Framework Convention on International Tax Cooperation: UNGA Res. 78/230 (Dec 2023); Terms of Reference adopted August 2024 (Res. 79/235 — most EU states against/abstaining but participating). Negotiations 2025–2027: INC1–2 Aug 2025 (NY), INC3 Nov 2025 (Nairobi), INC4 Feb 2026, INC5 Aug 2026, INC6 Nov–Dec 2026; target conclusion July 2027. Workstreams: the convention + early protocols on cross-border services and dispute prevention/resolution. The US walked out in 2025; consensus-vs-majority decision-making is the core EU concern.

7. Infringement procedures in taxation

• •Art. 258 TFEU: Commission letter of formal notice (≈2 months to reply) → reasoned opinion → CJEU referral. Art. 260: penalties for non-compliance; Art. 260(3) allows penalties at first referral for non-transposition. Monthly "infringement packages"; EU Pilot dialogue; Art. 259 state-vs-state is rare.
• •Tax grounds: late/incorrect transposition (VAT, DAC, ATAD, Pillar Two — several letters 2024–25), and national rules breaching fundamental freedoms (dividend WHT discrimination, exit taxes, foreign-asset reporting — e.g. C-788/19 Commission v Spain, Modelo 720, 2022). Recent: March 2026 package referring Spain to the CJEU on VAT transposition and targeting royalty WHT/capital-gains rules.

8. Own resources of the EU budget

Current system (Own Resources Decision (EU, Euratom) 2020/2053; changes need unanimity + national ratification, Art. 311 TFEU):

1. Traditional own resources — customs duties (Member States keep 25% collection costs) ≈14% of revenue.
2. VAT-based own resource — 0.3% call rate on the harmonised VAT base, capped at 50% of GNI ≈16%.
3. Plastic contribution — €0.80/kg non-recycled plastic packaging waste (since 2021) ≈5%.
4. GNI-based residual resource ≈65–70% (with lump-sum rebates for AT, DK, DE, NL, SE).

July 2025 MFF (2028–2034) package — five proposed new own resources (~€58bn/yr): ETS-based; CBAM revenues; e-waste; TEDOR (15% of national tobacco excise receipts); CORE (Corporate Resource for Europe — tiered lump-sum contribution from companies with EU turnover > €100m; heavily contested). In the Council Working Party on Own Resources through 2026.

9. Commission 2024–2029 tax priorities

• •Simplification/"decluttering": 25–35% reporting-burden reduction targets; 2026 Work Programme (Oct 2025) announced a tax omnibus and withdrew Unshell/ATAD3, the FTT, DEBRA and the Transfer Pricing Directive (→ non-binding EU Transfer Pricing Platform). The tax simplification package was proposed 24 June 2026: a Taxation Omnibus (amending PSD, IRD, ATAD, Merger, Dispute Resolution and FASTER directives — e.g. removing PSD/IRD thresholds/holding periods, CFC exemption for Pillar Two groups; target transposition 2028) plus a DAC recast streamlining reporting obligations.
• •Pending files kept alive: BEFIT, HOT, the 2018 digital tax proposals (DST, significant digital presence — retained as leverage), Energy Taxation Directive recast.
• •Competitiveness agenda: Draghi report (Sept 2024) flags 27-system tax fragmentation; Competitiveness Compass (Jan 2025); "28th regime" discussions for innovative companies (tax elements need unanimity).
• •Green taxation: Hoekstra portfolio couples climate and tax (kerosene taxation "absurdity" remark; ETD, CBAM, ETS2 context).
• •Tobacco Taxation Directive revision + TEDOR proposed 16 July 2025 — under negotiation.

10. Fiscalis, TADEUS, EU Tax Observatory

• •Fiscalis 2021–2027 — Regulation (EU) 2021/847; €269m; funds trans-European IT systems (the bulk), joint actions, expert teams, training; open to candidate/neighbourhood countries (incl. Ukraine, Moldova, Georgia). Interim evaluation COM(2026) 18; successor proposed in the 2028–2034 MFF.
• •TADEUS (Tax Administration EU Summit) — heads of the 27 tax administrations + Commission; first summit June 2018 (Thessaloniki); ≥2 meetings/year; workstreams: administrative-cooperation KPIs, tax-gap estimation, VAT fraud/Eurofisc, cybersecurity, AI in tax administration.
• •EU Tax Observatory — independent research lab at the Paris School of Economics (launched June 2021, director Gabriel Zucman; EU-funded via DG TAXUD grants); flagship: Global Tax Evasion Report 2024 (billionaire minimum tax proposal fed G20 2024 debates).

11. Pending-files dashboard (mid-2026)