The original purpose of taxation is to generate revenue for governments, but it also affects other key policy areas, such as competition, employment and investment.
Tax is collected from individuals and companies and levied on income, consumption, wealth, property or certain economic activities. Non-compliance is punishable by law.
Taxation is a valuable device for public authorities because it can be used to influence the behaviour of economic actors. So Member States defend their prerogatives in this area, making EU harmonisation more difficult. It should be remembered that all European legislation on taxation requires unanimity in the Council.
The wide impact of taxation also means that from time to time Member States retain certain tax measures for reasons of competitiveness, even though they are generally recognised as harmful to the EU as a whole.
The EESC on taxation
The EESC argues that Member States underestimate the degree of tax harmonisation needed for economic and monetary union to function efficiently and that more progress has to be made. The EESC is in favour of more harmonisation and alignment removing tax obstacles to cross-border trade in the Internal Market. More and greater cooperation between Member States is needed to curb tax fraud and tax evasion, including aggressive tax planning. Regarding indirect taxes the EESC supports the creation of a robust single European VAT area.