More Is Not Always Better: An Economic Assessment of the EU's Anti-Avoidance Tax Framework
ZEW Discussion Paper No. 26-027 // 2026Over the past decade, the European Union has built a comprehensive supranational framework to combat corporate tax avoidance. This article provides the first integrated assessment of the EU's post-2015 anti-avoidance architecture, combining evidence on profit shifting by European multinationals, the effectiveness and side-effects of individual regulatory instruments, and the cumulative costs of tax complexity. While these measures have reduced specific profit-shifting channels, their marginal revenue impact appears limited relative to the rise in tax complexity, compliance costs, and distortions to investment, risk-taking, and innovation. The uneven global implementation of recent instruments — notably the Global Minimum Tax and public country by-country reporting — has created a competitive asymmetry in which European multinationals bear regulatory burdens that their non-European competitors largely do not. The article concludes with policy recommendations to recalibrate the framework, eliminating rules whose marginal costs outweigh their marginal benefits while restoring the balance between enforcement and competitiveness that the EU's standard of "fair and efficient taxation" demands.