The establishment of the European Customs Union in 1968 was a very significant step. It has an internal and external aspect. So too does direct tax policy. The internal aspect of the direct tax policy includes the Anti-Tax Avoidance Directive, containing a general anti-avoidance rule and other things. The policy aims at transparency – including the automatic exchange tax rulings so as to avoid State Aid. Terms of settlement of litigation can be exchanged, for the same reason. There are provisions relating to tax avoidance and enablers. The Code of Conduct in Business Taxation (the “CCTB”) was first promoted in 2011: it provides for consolidation and apportionment which deal with such matters as transfer pricing. It aims to tax profits where they arise. This is an easy statement, but not a simple concept. There is also a new Directive on resolution of tax treaty disputes and a proposal to deal with hybrid mismatches. The external strategy for effective taxation involves listing countries which do not have good tax governance – transparency. exchange of information, absence of State Aid. “Fairness” in tax competition requires no harmful tax measures and compliance with the CCBT (presently under review), which is hostile to uncontrolled tax competition. The Apple litigation relating to State Aid shows that the European Union accepts territoriality but requires an arm’s length transfer pricing provision in each country’s law. As can be seen, the internal aspect has important external implications.