In this scientific article, the results of research on the development of the tax system in the conditions of decentralization in the countries of the European Union are presented. The peculiarities of formation of tax revenues of local budgets at the level of municipalities in European countries are explored. An analysis of the structure of tax revenues to local budgets has been carried out. The basic taxes that serve as sources of revenues to local budgets are determined. The socio-economic objectives of functioning of the tax system at the level of municipalities are given.