Introduction

The 2025 Annual Report on Taxation (ART) provides a factual and analytical description of taxation and tax systems in the Member States of the European Union (EU). The Report assesses recent developments of the tax mix to inform the debate about a future-proof tax mix, including a thorough analysis of the challenges posed by an ageing population. The ART 2025 describes recent tax policy initiatives at both EU and national levels and presents the approaches to measure tax gaps (i.e., the difference between potential and actual tax revenues for different tax types). The Report also discusses the instrumental role of tax administrations to facilitate tax compliance. It concludes by analysing the progressivity features of EU tax systems and the challenges to ensure a fair taxation of high net-worth individuals.

The report is structured as follows:

  • Chapter 1 sets the scene for the rest of the report. It presents recent macroeconomic developments and outlook and depicts structural challenges for taxation with a special focus on the implications of population ageing.
  • Chapter 2 provides top-down analysis on the structure of tax revenues at EU and country level, starting by overall revenues, followed by the breakdown by economic function, and a survey on the most important tax types (PIT, CIT and VAT).
  • Chapter 3 focuses on recent tax-related reforms at EU and national level – also highlighting the role of the Recovery and Resilience Facility and the Technical Support Instrument.
  • Chapter 4 covers the measurement of tax gaps, e.g., the difference between potential and actual tax revenues for different tax types. While the chapter focuses on compliance gaps, policy gaps and other sources of tax gaps are also considered.
  • Chapter 5 discusses the institutional characteristics of tax administrations and some aspects of compliance risk management.
  • Chapter 6 focuses on the progressivity features of EU tax systems. It also touches upon tax measures targeting wealth and the challenges to ensure a fair taxation of high net-worth individuals.

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