In the decade-long debate about the nature of the European Union, multilevel governance is now the consensus model. Its most popular variant argues that the EU is a “regulatory state” which mainly deals with market integration but leaves issues of high political salience such as taxation to the member states. While there is indeed no trace of an EU power to tax, we show that contrary to the consensus view the EU by no means leaves taxation to the member states. Instead, it massively constrains their tax base, tax rates, and tax systems. We conclude that the EU does not only regulate markets but also core political issues such as taxation. The combination of the European regulation of taxation and the maintanance of member state power to tax is an essential characteristic of multilevel governance in the EU
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