The Repartition of Tax Powers in Federal States within the Context of the European Union

Abstract

In 1962, when the Neumark Report was published, the issue of possible limitations under European law on the repartition of tax powers among sub entities by Member States did not seem to be under discussion explicitly. Of the six Member States at the time, only Germany and Italy had a federal structure. Moreover the regions in these countries had only limited tax autonomy. Today's European Union is made up of many more Member States which have in one way or another transferred tax powers to regions than in 1962. This paper examines to what extent Member States have to take into account EU law when they transfer tax powers to the regions. Especially the impact of the non-discrimination principle and the fundamental freedoms of the TFEU are examined, as well as the influence of EU's policy on state aid.