How the EU Can Better Monitor Tax Expenditure Growth

Introduction

The fourth edition of the EU Tax Symposium 2026, held under the theme "The future of taxation: inequality and growth in the global economy," took place on 16–17 March in Brussels, co-organized by the European Parliament and the European Commission.

This blog focuses on the parallel session titled "Controlling the growth of tax expenditures while preserving competitiveness and fairness."

The session was moderated by Céline Gauer, Director-General of the Reform and Investment Task Force at the European Commission. She was joined by:

• Ľudovít Ódor, MEP, Member of the Subcommittee on Tax Matters
• Annette Alstadsæter, Director, Centre for Tax Research, Norwegian University of Life Sciences
• Sofia Berg, Fellow, Council on Economic Policies
• Pieter Hasekamp, President, Netherlands Bureau for Economic Policy Analysis

This blog captures the key points from the panel discussion.

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Defining Tax Expenditures: The EU's Missing Common Standard

The central issue raised by the panel was the EU's absence of a common definition for tax expenditures. Each member state operates its own tax system with its own classifications. Without a regular reporting mechanism, transparency on what individual states are doing remains limited.

Alstadsæter called on member states to provide more complete data. Currently, information on how states report, evaluate, and discuss tax expenditure data is limited, and further empirical research depends on access to better data.

Why the EU Needs Common Tax Expenditure Reporting Standards

Harmonizing tax benchmarks across member states is politically unrealistic, Sofia Berg acknowledged. Each country has its own system. What is achievable, however, is a harmonized set of reporting standards that member states can follow. Such standards would require each country to be transparent about its own benchmarks and what it classifies as a deviation from them. Harmonized reporting would also help gather more meaningful data from member states, benefiting the union as a whole.

Designing a Harmonized Tax Expenditure Evaluation Framework

A second proposal from Sofia Berg, also supported by Alstadsæter, was the creation of a uniform tax expenditure evaluation framework. Berg argued that evaluation should begin before an incentive is introduced. This means setting clear performance indicators, ensuring proper data collection, and identifying who stands to benefit.

After implementation, states should assess whether the measure achieved its intended goals and at what cost. Sunset clauses, for instance, would ensure this cycle repeats, requiring regular justification for any measure to continue.

On how to apply such a framework consistently across different national systems, Berg's answer was pragmatic: evaluations should be tailored to the provision they assess. The tax systems of the Netherlands and Ireland were cited as useful reference points for this approach.

Tax Expenditures Under the EU's New Economic Governance Framework

In 2024, the EU's New Economic Governance Framework was introduced to monitor how member states manage their public finances. Built around a single fiscal indicator of net expenditure growth, the framework offers some guidance on reporting, but not enough, Hasekamp noted.

The deeper challenge is definitional: what exactly qualifies as a discrete measure, and how should its fiscal impact be measured? Tax expenditures are hard to monitor because they are open-ended. They remain available for as long as taxpayers meet certain conditions, making their fiscal impact inherently unpredictable. They also trigger behavioural shifts: taxpayers adjust their conduct in line with available incentives, and that response ultimately shapes the final cost, which is equally difficult to forecast.

Making the Case to Policymakers

Ľudovít Ódor recommended including relevant tax expenditures in regular spending reviews. When evaluated alongside standard budget items, policymakers can directly compare their effects and make more informed decisions.

Pieter Hasekamp added another angle: presenting policymakers with the other side of the equation. Every tax expenditure reduces government revenue. Those are funds that could otherwise support public investment or reduce debt. The goal is not to eliminate tax expenditures, but to evaluate them properly: to determine how effectively they achieve the objectives they were designed to meet. Rigorous evaluation and clear results, Hasekamp argued, are ultimately the most persuasive tool available.

Harmful Tax Competition vs. Legitimate Tax Incentives

According to Alstadsæter, one of the clearest examples of harmful tax competition is when a member state introduces a preferential tax regime to attract wealthy individuals. While nationally beneficial, such a regime damages other member states, which lose the full tax revenue from individuals who relocated to take advantage of the incentives.

Existing tools, including state aid control and the reporting provisions under Article 14(2) of Directive 2011/85/EU, are insufficient to adequately address this problem. Hasekamp's recommendations were straightforward: report, be transparent, and apply peer pressure. He also flagged the need for clearer definitions: which activities constitute harmful tax competition, and at what threshold they cross that line.

Conclusion: Three Priorities for EU Tax Expenditure Reform

The panel discussion surfaced three key priorities.

First, the EU lacks a common understanding of what tax expenditures are. A harmonized definition at the EU level is necessary.

Second, existing rules fall short in guiding tax expenditure reporting, resulting in limited transparency. A new set of reporting standards is needed to systematically gather comparable data from member states.

Last but not least, a shared evaluation framework would benefit both member states and the union by improving data collection, transparency, and the assessment of whether tax expenditures are delivering on their objectives.

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