The Impact of Harmonization of Direct Taxes in the European Union on the Tax Sovereignty of Member States

Abstract

 Introduction: The harmonization of tax policies within the European Union is one of the key issues within the broader process of European integration. While a significant degree of harmonization has been achieved in the field of indirect taxation, direct taxes still remain within the jurisdiction of the Member States, which raises a series of legal and political dilemmas. The tension between the need for the efficient functioning of the single market and the preservation of fiscal sovereignty is particularly pronounced. Although the Union respects the tax autonomy of its members, through judicial practice and legislative initiatives, it increasingly influences the shaping of national policies. Establishing a sustainable framework for the coordination of tax policy remains a challenge both from a legal and an institutional point of view.

 Aim: The aim of the paper is to analyze the legal and institutional mechanisms of harmonization of direct taxes in the European Union, with special reference to the issue of preserving the tax sovereignty of the member states. Through this analysis, we try to point out the importance of achieving a balance between national interests and the need for the efficient functioning of the common market.

 Materials and Methods: For the writing of the paper, legal regulations were used, followed by court decisions and relevant scientific literature.

 Results: The paper confirms the justification of harmonization in the area of direct taxation as a way of fighting against harmful competition and as a response to global challenges.

 Conclusion: Direct taxation remains one of the last areas where the tension between national jurisdiction and European integration is clearly manifested. Although the political will for deeper harmonization is lacking, judicial practice and the functional need for a single market are gradually redefining the limits of fiscal sovereignty. Such a process, although subtle, confirms that European tax coordination relies more on legal mechanisms than political consensus. In the future, we can expect a gradual abandonment of the principle of consensus in decision-making as a step towards establishing a more efficient management system within the European Union.