The book deals with national sovereignty of Member States in tax matters, and the tensions created by the fact that the decisions by the European Court of Justice requires them to exercise consistently with the Community law. Contributions in the book cover a variety of critical issues, including the current and possible future effects of the internal market on the fiscal sovereignty of Member States; the limits that European law imposes on Member States' policy sovereignty in matters of international tax law; the effect of European law on taxes levied by local authorities; and the consequences the Treaty of Lisbon may have for Member States' fiscal sovereignty.

Although EU Member States have retained national sovereignty in tax matters, a consistent line of decisions by the European Court of Justice requires them to exercise these powers consistent with superseding Community law. In other words, the Member States are not wholly autonomous. This in turn creates serious tensions. This timely resource covers a variety of critical issues, including the current and possible future effects of the internal market on the fiscal sovereignty of Member States; the limits that European law imposes on Member States’ policy sovereignty in matters of international tax law; the effect of European law on taxes levied by local authorities; and the consequences the Treaty of Lisbon may have for Member States’ fiscal sovereignty.

Most EU-scholars conceive of the EU as a multilevel polity with strong powers to regulate economic policy externalities among the member states but little power to intervene in, let alone assume, core functions of sovereign government ('core state powers') such as foreign and defense policy, public finance, public administration, and the maintenance of law and order. This book challenges this view. Based on a systematic comparison of integration processes in military security, fiscal policy, and public administration, it finds steady progress in the integration of core state powers although with substantial sectoral variation. But the EU is not heading towards state-building. In contrast to the historical experience of national federations, the European integration of core state powers proceeds mostly by regulating national capacities, not by creating European ones, and leads to territorial fragmentation rather than increased cohesiveness.

Fiscal federalism refers to the division of fiscal powers — powers to tax and spend — between different levels of government. The European Union (EU) is often seen as a legislative giant on clay feet, and one of the principal reasons for this feebleness is the lack of a significant fiscal capacity at the Union level. EU Fiscal Federalism: Past, Present, Future explores ten aspects of the EU's fiscal constitution relating both to the fiscal limits it imposes on Member States and the evolution of its own fiscal policy. Bringing together an international and distinguished group of scholars, this volume analyses the different legal dimensions of fiscal federalism within the EU, from the various aspects of the single market (free movement, banking union, state aid, tax harmonisation) to the EU's budget and Economic and Monetary Union. The essays provide a fascinating overview of the topic as well as a detailed analysis of where EU fiscal federalism stands today and how it might develop in the future. Sweeping and thorough, EU Fiscal Federalism addresses topics vital to maintaining and strengthening the Union's fiscal capabilities. It will appeal to academics and students of European Union law and political economy as well as European policymakers.

The rules of the Member States on the taxation of the foreign business income of companies, whether such rules are based on the fiscal principle of territoriality or on the principle of worldwide taxation, are in conflict with the objective of achievement of the internal market. This objective is indeed difficult to reach when it comes to the taxation of foreign income, given that the Member States are far from taxing companies doing business cross-border as if their operations were purely domestic. Areas of conflict include particularly the taxation of foreign profits, the deduction of foreign losses, the elimination of international double taxation and the attribution of profits to permanent establishments. This dissertation analyses this conflict on the basis of a study of the case law of the European Court of Justice as well as some of the key provisions of the European treaties. It appears that both the fiscal principle of territoriality and the principle of worldwide taxation give rise to complex issues of compatibility with the law of the European Union. Although the analysis conducted throughout the dissertation provides some guidance for the taxation of the foreign business income of companies, it is concluded that the Court cannot, by itself, efficiently resolve the conflict between such taxation and the objective of achievement of the internal market.

The role of taxation within the European Union has risen (and is rising) over the years due to the establishment of the Economic and Monetary Union and the economic/financial and COVID crises. It is well established that taxation is characterized as an obstacle for the functioning of the internal market and the interpretation of the fundamental freedoms has a direct impact on the design of the domestic tax systems. The first part of this article addresses the clash between the supranational economic freedoms and the domestic tax systems in the light of the federal experience of “two levels of government”. The second part, differently, sheds light on the role of taxation within the Economic and Monetary Union. After having enucleated a principle of solidarity according to article 122(2) of the Treaty on the Functioning of the European Union, the article inquires the foundations and the limits of the European Union's authority to tax. In particular, it aims at demonstrating that the financial assistance to the Member States in exceptional circumstances should be funded through the EU budget and EU taxes.Full-text Paper.

There is evidence that fiscal rules, in particular well-designed rules, are associated with lower sovereign spreads. However, the impact of noncompliance with fiscal rules on spreads has not been examined in the literature. This paper estimates the effect of the Excessive Deficit Procedure (EDP) on sovereign spreads of European Union member states. Based on a sample including the 28 European Union countries over the period 1999 to 2016, sovereign spreads of countries placed under an EDP are found to be on average higher compared to countries that are not under an EDP. The interpretation of this result is not straight-forward as different channels may be at play, in particular those related with the credibility and the design of the EU fiscal framework. The specification accounts for typical macroeconomic, fiscal, and financial determinants of sovereign spreads, the System Generalized Method of Moments estimator is used to control for endogeneity, and results are robust to a range of checks on variables and estimators.

Carsten Wendt analyses the necessity, the concept as well as potential advantages and effects of a common tax base for multinational enterprises in the European Union. He addresses important issues concerning a common tax base, such as the definition of the consolidated group, the technique and scope of consolidation and the formula used to allocate the consolidated tax base among the involved member states.

What are the different market types that shape the European Union's internal market? Schütze proposes three models that assist in explaining the transitions in the structure of the EU internal market. The international model demands that each state limits its external sovereignty, while retaining internal sovereignty over its national market. The federal model declares that within a "common market" states must lose a part of their internal sovereignty, and in accordance with the principle of "home state" control, goods are entitled to be sold freely on a "foreign" market in compliance with home state law. The national model proposes that the trade restrictions above a legislative or judicial Union standard should be removed. Schütze's book analyses the changing structure of European law in relation to the European internal market. The General Part starts out by offering a historical analysis of the relationship between international law and market coordination up to the twentieth century but also provides an in-depth analysis of the constitutional principles which controlled the "integration" of the US "common market". The Special Part then specifically addresses the decline of the international model in relation to the EU internal market and the corresponding rise of a federal market philosophy after Cassis de Dijon. The final chapter explores the exceptional constitutional principles that apply to fiscal matters. This is the second volume in Schütze's trilogy on the "Changing Structure of European Law". Exploring the changing structure of negative integration in the past 60 years, the book complements his previous volume "From Dual to Cooperative Federalism" which analysed the evolving structure of positive integration. A third volume will finally explore the formal constitutional aspects in the evolution of the European Union into a federal union of States.

Tax coordination in the European Union (EU) should be guided by the twin stars of neutrality and subsidiarity. While tax neutrality generally requires a substantial degree of tax harmonization, subsidiarity, in contrast, implies that each Member State should be permitted as much tax sovereignty as is commensurate with the goals of free trade and free competition in the single internal market. To explore the potential conflict between the neutrality objective and subsidiarity considerations, the Foundation for European Fiscal Studies of Erasmus University Rotterdam organized a seminar on May 20, 1994 to discuss the presentations prepared by Stephen Smith (Jean Monnet Senior Lecturer in European Economics at University College London and Deputy Director of the Institute for Fiscal Studies) and Ren Barents (Legal Secretary of the Court of Justice of the European Communities). Smith concludes that the complex balance between neutrality and subsidiarity requires supervision and audit of Member States' enforcement practices. Barents does not believe that the subsidiarity principle has operational significance in Community litigation. This brochure is the third in a new series initiated by the Foundation for European Fiscal Studies.