Taxation of the financial sector

Publications

1 Jul 2026

Fiscal Policies and Growth

External Publications

Andrzej Robaszewski

Adam Śmietanka

Bradford Rohmer

Giacomo Luchetta

Grzegorz Poniatowski

Maximilian Freudenthaler

Maddalena Monaco

Florian Poli

Stephen Dale

Volume 1 Volume 2 Executive summary

Andrzej Robaszewski

Director of Fiscal Policy Studies and Sustainable Development
Andrzej Robaszewski is Director of Fiscal Policy Studies and Sustainable Development. His areas of expertise also include EU economic governance, energy markets and ESG.

Articles from this author:
- Wealth Taxation, Including Net Wealth, Capital and Exit Taxes
- The CASE 2026 Easter Basket
  The cost of the Easter basket in 2026 is significantly higher than a year earlier. According to CASE Online CPI data, its value increased by 12.8% year-on-year, with the rise driven primarily by higher prices of dark chocolate. Excluding this product, the increase would have been only 1.8%, highlighting how strongly individual items can influence the overall basket.
- VAT gap in Europe. Edition 2025
  The report provides an updated analysis of the VAT compliance gap and the VAT policy gap across EU Member States, as well as selected EU candidate and potential candidate countries, covering trends over the period 2019-2023 and, for the first time, including selected EU candidate and potential candidate countries. It examines the discrepancy between the theoretical VAT Total Tax Liability (VTTL) and actual VAT revenues, offering insights into inefficiencies in tax compliance and revenue losses driven by policy choices.
Author’s articles
Adam Śmietanka
Bradford Rohmer
Giacomo Luchetta
Articles from this author:
- 171st mBank-CASE Seminar Proceedings: Tax Challenges and Opportunities of the Growing Digital Economy.
  Value Added Tax (VAT) is a tax applied to all transactions carried out for consideration in the EU. VAT systems are harmonised at the EU level to ensure neutrality and to minimise their negative impacts on the functioning of the Internal Market. We invite you to read the latest mBank-CASE Seminar Proceedings No. 171 by … Continued
Grzegorz Poniatowski
Articles from this author:
- 171st mBank-CASE Seminar Proceedings: Tax Challenges and Opportunities of the Growing Digital Economy.
  Value Added Tax (VAT) is a tax applied to all transactions carried out for consideration in the EU. VAT systems are harmonised at the EU level to ensure neutrality and to minimise their negative impacts on the functioning of the Internal Market. We invite you to read the latest mBank-CASE Seminar Proceedings No. 171 by … Continued
- Enhancing Credibility and Commitment to Fiscal Rules
  The objective of this paper is to derive the characteristics of an effective fiscal governance framework, focusing on the incentives that ensure a commitment to the fiscal rules. We study this problem with the use of econometric tools, complementing this analysis with formal modelling through the lens of a dynamic principal-agent framework. Our study shows … Continued
- Study and Reports on the VAT Gap in the EU-28 Member States: 2017 Final Report
  CASE prepared a new study for the European Commission on the VAT Gap in the European Union in 2015. The figures offer an important snapshot of the problems of collecting VAT in the EU and what needs to be done to improve revenues and fight tax fraud. During 2015, the overall VAT that should have … Continued
Author’s articles
Maximilian Freudenthaler
Maddalena Monaco
Florian Poli
Stephen Dale

This study, prepared in the consortium with: Syntesia srl, Intellera Consulting for the European Commission’s Directorate-General for Taxation and Customs Union (DG TAXUD), examines the tax framework for the financial sector. The purpose of the study is to (i) collect, analyse and present evidence of the existing problems with the current tax framework, (ii) provide insight on policy objectives and future considerations which could address these problems, and (iii) assess and compare the likely impacts of these considerations. The tax framework is assessed in terms of its two main components, namely: The EU VAT framework for the financial sector, which is characterised by the exemptions laid down in Article 135(1)(a)-(g) of the VAT Directive. This framework, in place since the introduction of the EU VAT system in 1977, was historically justified on technical grounds related to the difficulty of defining the tax base on services priced in terms of interest-rate spread and other implicit charges. Outside the VAT framework, Member States sovereignly apply a variety of sectoral taxes. These include taxes on the sale of certain products, such as insurance premium taxes (IPTs) and stamp duties, financial transaction taxes (FTTs), financial institution levies, payroll taxes on salaries in the financial sector, additional corporate income tax (CIT), and so-called windfall taxes targeting exceptional profits.

problems identified:

Due to the VAT exemption, providers of financial services do not have the right of deduction. This in turn means that many of the sector’s input purchases are taxed, resulting in a tax burden that does not appear on invoices and therefore is commonly referred to as ‘hidden’ VAT.
The overall framework is uncertain, complex and fragmented . Divergence across Member States is especially acute in the treatment of insurance-related services, fund and asset management, custody services, certain derivatives, payment value chains and some crypto-asset activities.

Consequences of the problems

The exemption creates economic distortions and strong incentives to produce services in-house or within domestic VAT groups rather than purchasing them externally or cross-border. This reduces VAT neutrality, limits outsourcing, discourages specialisation and may slow down innovation and productivity improvements.
The study also identifies important fiscal impacts. The overall VAT liability associated with the financial sector is estimated at EUR 72.4 billion in 2023, but most of this is hidden VAT on inputs rather than VAT on final consumption.
The tax framework also imposes compliance burdens. Administrative costs for VAT compliance in the financial sector are estimated at around EUR 1.3 billion annually, with a further EUR 870 million for compliance with sectoral taxes.

The study concludes that the original technical rationale for the VAT exemption no longer remains fully valid. In combination with divergent national sectoral taxes, the current tax framework causes distortions, complexity, legal uncertainty and fragmentation. These problems are becoming more serious as the sector digitalises and value chains become more specialised.

Related publications

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Taxation of the financial sector

Andrzej Robaszewski

Articles from this author:

Adam Śmietanka

Bradford Rohmer

Giacomo Luchetta

Articles from this author:

Grzegorz Poniatowski

Articles from this author:

Maximilian Freudenthaler

Maddalena Monaco

Florian Poli

Stephen Dale

Related publications

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Taxation of the financial sector

Andrzej Robaszewski

Articles from this author:

Adam Śmietanka

Bradford Rohmer

Giacomo Luchetta

Articles from this author:

Grzegorz Poniatowski

Articles from this author:

Maximilian Freudenthaler

Maddalena Monaco

Florian Poli

Stephen Dale

Related publications

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