Legal uncertainty exposes EU tax divide, Spain among weakest performers

Spain ranks among the weakest-performing EU countries for tax certainty in a recent comparative study, underscoring how legal unpredictability is emerging as a key – and often overlooked – constraint on Europe’s competitiveness.

The report, published by EPICENTER and authored by economic analyst Diego Sánchez de la Cruz, compares tax systems across 16 EU Member States, focusing not on tax rates but on how consistently and reliably tax rules are applied in practice.

Its findings suggest that while tax debates in Europe tend to focus on rates and revenues, it is legal certainty – or the lack of it – that increasingly shapes business decisions.

Spain among weakest performers

Spain is grouped among the lowest-ranking countries in the study, reflecting what the report identifies as patterns of administrative unpredictability, frequent disputes and inconsistent enforcement.

According to the analysis, these factors create a business environment in which companies struggle to anticipate how tax rules will be interpreted, increasing legal risk and discouraging long-term investment.

High levels of litigation and instances where courts overturn tax authority decisions are cited as indicators of systemic instability, suggesting gaps between legislation and its practical application.

A gap beyond tax rates

A central message of the study is that tax competitiveness cannot be measured by rates alone.

Countries with similar levels of taxation can offer very different operating environments depending on how predictable their tax systems are. Weak legal certainty, the report argues, acts as an “implicit tax”, increasing the real cost of doing business.

Uncertainty raises compliance costs, prolongs disputes and complicates long-term planning. For companies operating across borders, these risks can outweigh differences in nominal tax burdens.

Diverging systems within the Single Market

The EPICENTER ranking reveals significant divergence across EU Member States in how tax systems function in practice.

Some countries score highly due to stable administrative practices, clear guidance and efficient dispute resolution mechanisms. In these environments, businesses can operate with a high degree of predictability, even where tax burdens are relatively high.

Others are characterised by frequent reinterpretation of rules, aggressive audits or lengthy judicial processes, creating an environment of uncertainty that undermines investor confidence.

Such divergence raises questions about the coherence of the Single Market, where firms are expected to operate across borders but face markedly different levels of legal risk.

Administration as the decisive factor

The report emphasises that legal certainty is shaped less by legislation than by administration.

Even where tax rules are broadly similar, differences in enforcement practices, institutional quality and administrative culture can lead to very different outcomes.

In Spain’s case, the combination of complex procedures, inconsistent interpretation and prolonged dispute resolution appears to be a key factor behind its low ranking.

Concerns around Spain’s tax framework have also drawn scrutiny from Brussels. In March, the Commission referred Spain to the Court of Justice of the EU over what it described as “discriminatory tax treatment” of non-resident taxpayers, arguing that the practice infringes EU rules on the free movement of capital.

The case adds to broader concerns around predictability and consistency in Spain’s tax framework, reinforcing the report’s wider argument that administrative certainty has become a competitiveness issue in its own right.

This suggests that improving competitiveness may depend as much on administrative reform as on legislative change.

Policy implications for Europe

The findings come as the EU seeks to strengthen its economic position amid intensifying global competition.

While much of the policy focus has been on industrial strategy and investment, the report argues that improving the predictability of tax systems should also be a priority.

Reforms aimed at simplifying rules, ensuring consistent interpretation and accelerating dispute resolution could reduce uncertainty without lowering tax rates.

More broadly, the study highlights the need to integrate legal certainty into EU tax debates, where it has traditionally received limited attention.

A growing issue on the EU agenda

Legal certainty is gaining traction in Brussels, as policymakers recognise the link between regulatory quality and economic performance.

Concerns over administrative complexity and unpredictability are driving calls for more stable and transparent tax frameworks across the EU.

The EPICENTER report adds to the debate by offering comparative evidence of how legal certainty varies across Member States – and how those differences shape competitiveness.

For Spain, the findings point to a need for reform. More broadly, however, they underline a structural challenge for Europe: ensuring that tax systems are not only fair, but predictable.

[BM]