This is decided by your national government, not the EU.
Governments set tax rates on company profits, personal income, savings and capital gains (profits made from selling an asset, such as a house). The EU merely keeps an eye on these decisions to see they are fair to the EU as a whole.
This means ensuring national tax rules are consistent with the EU's goals of job creation and do not impede the free flow of goods, services and capital around the EU, or give businesses in one country an unfair advantage over competitors in another.
Moreover, national governments remain in control of raising taxes as EU law requires that no EU decisions on tax matters be taken unless all member countries are in unanimous agreement.
Common rules on petrol tax are there to ensure trade is fair.
Different EU countries have different views on how much tax to raise and how to spend it, and the EU does not stand in their way, if the spending stays within reasonable limits.
However, if countries overspend and go into too much debt, they could jeopardise economic growth in other EU countries and the stability of the eurozone.
The EU pays particular attention to company taxation because of the risk that tax breaks in one country might unfairly lure firms away from competitor countries. EU countries are politically bound by a code of conduct not to do this.
Unlike most forms of direct tax (corporate tax, income tax, etc.), VAT does require a degree of EU involvement. This is because it is fundamental to a properly functioning single market and fair competition across the EU.
So the EU has set:
This still leaves considerable leeway for differences in national VAT rates – because there are no upper limits on VAT rates, governments are free to apply reduced rates to a wide range of goods/services and some countries are temporarily exempted from the rules anyway.
Income taxes are decided by national governments.
Differences in taxes on these products (excise duties) can very easily distort competition across EU borders. This is why they too are subject to some common rules – although these still leave plenty of room for variation, due to:
It makes sense for the EU to have common rules on taxing energy products – enabling the EU to take a single approach to using them as incentives to energy efficiency. But, again, rules are flexible enough to accommodate special national circumstances.
Personal tax rules and rates are matters for individual EU governments – unless an individual's cross-border rights are affected. So the European Commission has acted to ensure EU citizens are not deterred from working in other EU countries by problems linked to the transfer and taxation of their pensions and pension rights.
The EU also has a role in preventing cross-border tax evasion. EU governments lose legitimate revenue if their residents do not declare interest income on savings held abroad.
While EU citizens can place their savings where they think they will get the best return, they can't use this as a means of avoiding tax. Most European countries have agreed to share information on non-residents'savings.
The few exceptions (e.g. Austria, Luxembourg) instead impose a withholding tax, a large part of which they transfer to the saver's home country. As this is a bulk payment, the individual saver's anonymity is not breached, but the tax is still paid where it is due.
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