Diego Sánchez de la Cruz // 4 March 2026

This paper examines an often-overlooked dimension of tax policy: legal certainty. While European tax debates typically focus on rates, bases, and revenue levels, this study argues that the predictability and consistency of tax enforcement play an equally decisive role in shaping economic incentives.

Drawing on a new comparative ranking developed by Foro Regulación Inteligente and covering 16 EU member states, the paper combines data on tax litigation, administrative practices, institutional quality, and competitiveness-related features. It integrates evidence from the OECD, Eurostat, ISORA, the Tax Foundation, and governance indicators to assess how tax systems operate in practice — not just how they are designed on paper.

The findings reveal wide disparities across Europe. Countries with similar tax burdens often provide very different effective tax environments, depending on how tax authorities conduct audits, interpret rules, and resolve disputes. In jurisdictions where enforcement is predictable and proportionate, investment incentives are preserved even under relatively high statutory rates. By contrast, aggressive or inconsistent enforcement raises compliance costs, increases litigation, and functions as an implicit tax on entrepreneurship and capital formation.

The paper also highlights significant variation in litigation outcomes, showing that frequent court rulings against tax authorities signal interpretative instability and legal risk. Case studies illustrate how retrospective challenges and discretionary practices can undermine trust, delay investment decisions, and encourage defensive compliance behaviour.

The paper concludes by outlining policy implications for Europe, emphasising that strengthening legal certainty does not necessarily require lowering taxes. Clearer legislation, consistent interpretation, effective dispute resolution, and stronger procedural safeguards can significantly improve the effective tax environment while maintaining revenue levels.

The main findings of the briefing include:

• Legal certainty is a core determinant of effective tax burdens and investment incentives.
• EU member states display substantial divergence in tax enforcement quality despite comparable tax levels.
• High levels of litigation and frequent court reversals signal institutional weakness and uncertainty.
• Unpredictable enforcement operates as an implicit tax on growth, entrepreneurship, and cross-border investment.
• Improving legal certainty can enhance competitiveness without reducing statutory tax rates.