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The ‘‘Benefits’’ of being small: Loose fiscal policy in the European Monetary Union; Lamar Crombach; Frank Bohn; Jan-Egbert Sturm; Journal of Public Economics, 2024-06, Vol. 234, p. 105120, Article 105120

Independent central banks typically counteract positive fiscal shocks that would otherwise increase the inflation rate above the target. In a theoretical model, we show that, in a monetary union, this mechanism implies weaker responses to national fiscal shocks because the overarching central bank must account for the fiscal policies of all members. The model highlights that the response is especially weak for small members, given their marginal impact on the union’s aggregate inflation rate. Empirically, we exploit the exogenous variation in elections to show that the European Central Bank reacts more vigorously to fiscal shocks from larger countries. 

Conflicts between Directives that Require Taxation of Income and Tax Treaties: The Effectiveness of the EU Primacy-based Conflict Rule; Vergouwen, T. M., Intertax; 2024-01, Volume 52 (4), p. 262

Directives in the area of direct taxation can obligate EU Member States to tax income. This obligation can conflict with obligations under tax treaties to not tax income. With respect to such a conflict, the question arises as to how it should be resolved. In this article, this question is addressed from the perspective of EU law, more specifically the primacy of EU law's conflict rule. Pursuant to this conflict rule, tax treaty provisions whose application within a legal order of an EU Member State is incompatible with a provision of a directive, must be set aside by an EU Member State court. Whereas this conflict might seem to provide an effective tool for resolving conflicts between directives requiring taxation and tax treaties requiring non-taxation, the prohibition of reverse vertical direct effect, in addition to Article 351 TFEU (for pre-accession tax treaties with third states), entails that it is, in fact, an ineffective tool for resolving such conflicts. This is because it follows from this prohibition that a directive cannot set aside a tax treaty on the basis of the primacy-based conflict rule if this results in an obligation for a taxpayer such as a higher tax burden.

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