Towards fair, efficient and growth-friendly taxes
The EU does not have a direct role in collecting taxes or setting tax rates. The amount of tax each citizen pays is decided by their national government, along with how the collected taxes are spent.
The EU does however, oversee national tax rules in some areas; particularly in relation to EU business and consumer policies, to ensure:
- the free flow of goods, services and capital around the EU (in the single market)
- businesses in one country don’t have an unfair advantage over competitors in another
- taxes don’t discriminate against consumers, workers or businesses from other EU countries
The single market allows goods and services to be traded freely across borders within the EU. To make this easier for businesses – and avoid competitive distortions between them – EU countries have agreed to align their rules for taxing goods and services. Certain areas benefit from specific agreements, such as value added tax (VAT) or taxes on energy products and electricity, tobacco and alcohol.
The EU also works with EU countries on the coordination of economic policies and corporate and income taxes. The aim is to make them fair, efficient and growth-friendly. This is important to ensure clarity on the taxes paid by people who move to another EU country, or businesses that invest across borders. This coordination also helps to prevent tax evasion and avoidance.