The competence of the European Union in matters of taxation

Abstract

The European Community was established to provide an economic force which can adequately compete with the United States of America. In order to achieve this goal, it was recognized that Member States should cooperate and coordinate their actions in order to achieve a competitive and unified market. In order to achieve this goal it was recognized that certain changes to Member States' national taxation systems would have been necessary. Development in taxation matters in the European Community started from the removal of customs duties on trans-border transfers and the imposition of a Europe wide turnover taxation system, as these have a more direct impact on the market integration process. Taxation within the European Union has started from an area which was regarded as being directly linked to the sovereignty of the state by time moving to an essential element in need of a minimum level of harmonisation in order to ensure a workable single European market. The author provides an analysis of the balance that has been achieved between the reluctance of Member States to grant the European Union further competence over issues of taxation and a basic level of tax law harmonisation to ensure that there is a level playing field. Major developments in European tax law have been achieved through the implementation of the Treaty principles and directives by the European Court of Justice in this regard. The author will treat the developments of any new competences of the European Union in matters of taxation in the light of the draft Constitution, and the direction that taxation in Europe seems to be heading. From recent statements made by representatives of Member States there still is significant reluctance to the idea of harmonisation of taxation, however Member States have agreed on certain basic common principles which have an impact on the further development of taxation in the European Union.