The European Union is working on strengthening both its economic and political integration. The fiscal system plays a crucial role in this process, reflecting the balance between economic and political interests. Fiscal functions like allocation, redistribution, and stabilization are managed at different levels within the EU, leading to a complex decentralized community. Unlike traditional fiscal federalism, the EU is centralizing fiscal authorities from national states to the EU level. The main goal of the paper is to analyze fiscal relations in the EU based on these functions. The study suggests that due to political constraints, the development of a common EU public finance system relies on alternative approaches like harmonization and cooperation.