European Commission Publishes Annual Report on the Implementation of Tax Policies in Member States

On July 10, the European Commission published its Annual Report on Taxation (ART) for the year 2026, offering a detailed overview of taxation policies in all EU countries and overviewing recent trends in EU tax systems and identifies ways to enhance compliance.

Key observations:

1. EU’s overall tax-to-GDP ratio shifted to 39.4% in 2024. This trend was oobserved in 22 Member States, driven largely by a stronger reliance on labour taxes, including social contributions. They accounted for 51.5% of total tax revenue, while consumption taxes covered 26.8 % and capital taxes – 21.6%.

2. At the labour market, taxes and social contributions contribute to the improvement of work incentives. Targeted tax tools can help encourage businesses to invest in key areas, including low-carbon technologies.

3. The Commission and national administrations are working to simplify tax rules, boost competitiveness, and stimulate growth. Through the Technical Support Instrument (TSI) and the Recovery and Resilience Fund (RRF), the Commission contributes to the modernization of tax administrations – 22% of TSI projects focus on improving tax compliance and 21% – on digitalisation of revenue administration.

4. Consumption taxes are losing in revenues due to the strong decrease in revenues from environmental taxes. By contrast, the increase in revenues from CIT is observed through the shift towards capital bases, thus compensating for the decline in revenues from property taxes.

5. EU citizens see action against tax avoidance and evasion as the top priority for tax policy in the EU, especially in France (65%), Cyprus (64%), Portugal (61%), and Finland (60%). Estonia is the only Member State where combating tax avoidance and evasion is not ranked as the top priority; there, a larger share of respondents favour preventing double taxation between EU countries (40%) over measures to combat tax avoidance and evasion (36%).

6. Tax simplification measures at the EU and national levels strengthen anti-avoidance policies and compliance enforcement. Compliance enforcement capacity in all Member States is increased thanks to administrative cooperation, information exchange and peer learning.

Annual Review on Taxation 2026: Review of Taxation Policies in the EU Member States