Over the last twenty-five years, the picture of European tax law has changed significantly. While the European Economic Community (EEC) had largely harmonized indirect taxes already, the law of direct taxation had not realized any substantial influence of EEC law before the 1990 Directives entered into force. With a turbulent start in the mid-1990s, the Court of Justice has reshaped income taxation of cross-border activities and investment by activating the fundamental freedoms. Further developments brought about additional waves of intra-European Union (EU) tax neutrality – joint efforts to combat unfair tax competition, to improve cross-border administrative assistance and to counter Base erosion and profit shifting (BEPS).
In their interdisciplinary analysis, two lawyers and one economist reflect on these developments from the specific perspective of the vertical allocation of powers. Avoiding any misleading split-of-sovereignty language, they demonstrate the current balance of taxing powers between the EU (Commission [COM], Court of Justice of the European Union [CJEU]) and its Member States, most notably the balance of positive and negative integration (section 2). On this basis, they explore options for future EU rule-making on the field of direct taxes (section 3), stress the persistent relevance of negative integration (section 4) and indicate ‘third ways’ – informal cooperation in tax legislation, indirect influence of non-tax measures to tax policy (section 5) and eventually, the introduction of European taxes (section 6).EC Tax Review