New Financing Report Pushes for E.U. Taxes
The European Union should attempt to fund the bloc with its own dedicated taxes rather than national contributions, according to a new report by former Commissioner Mario Monti, seen by Handelsblatt.
Jan Hildebrand and Ruth Berschens
The European Union will consider plans to raise its own taxes, instead of relying on national contributions, according to a new set of proposals seen by Handelsblatt.
Former Italian Prime Minster Mario Monti, tasked by E.U. leaders and the Commission to produce a report on E.U. funding, said the bloc should in future be financed directly with its own taxes rather than through contributions from member states.
Possible sources of revenue are a CO2 levy, an electricity tax, an E.U. corporate tax and a financial transactions tax, said Mr. Monti’s 100-page report “Future Financing of the E.U.” which has been obtained by Handelsblatt will presented by Mr. Monti and his team to the European Parliament Budgets Committee this week and then published later this month.
Mario Monti, former Italian prime minister and European Commissioner, has compiled a 100 page report on E.U. financing. Source: Reuters
The report is seen as the basis for the next seven-year E.U. spending plan which starts in 2021. It’s already run into opposition from Germany. “It’s completely unnecessary,” said German deputy Finance Minister Jens Spahn. “It shouldn’t be about more money for the E.U. budget, but about using the resources better.”
Günther Oettinger (pictured), the E.U.’s new budget commissioner since the start of the year, told the European Parliament this week that the E.U. can only master the mounting challenges it faces if it gets its own sources of revenue.
He has pledged a fundamental revamp of the bloc’s funding to cover unexpectedly high outlays caused by the refugee crisis and heightened security costs and has said he will present draft legislation shortly.
The E.U. Commission has €908 billion, or $952 billion, at its disposal in the current so-called multi-annual financial framework which runs from 2014 through 2020.
Under normal conditions, that would be ample. But these aren’t normal times. Since autumn 2014, when Jean-Claude Juncker became European Commission president, Europe has been shaken by a series of crises. Expensive crises.
Mr. Juncker has spent €500 million on refugee camps in Jordan and Lebanon, €1 billion on the E.U.’s agreement with Turkey to stop illegal migration into Europe and €700 million on refugees stranded in Greece.
The beefed up protection of the E.U. external borders and the planned deals with African nations to halt the influx of migrants are also costly, as are measures to combat terrorism, which has struck France, Belgium and Germany in the last two years.
And then there’s Brexit. The departure of Britain, a major net contributor, from the E.U. in 2019 will tear a double-digit-billion-euro hole in the bloc’s budget.
The other big contributors, led by Germany and France, aren’t inclined to make up for the shortfall. Mr. Oettinger indicated that current net receivers of E.U. funds such as Poland will then have to make sacrifices.
But Brexit also presents an opportunity because it will remove Britain’s special rebate, famously negotiated by former British Prime Minister Margaret Thatcher and effective since 1985, and thereby also axe all the related special financial provisions it brought other member states.
Mr. Monti’s paper said that after Brexit, all corrective mechanisms on the revenue side of the E.U. budget should be removed.
At present, the 28 member states provide the bulk of the funding through contributions from their national budgets. A smaller portion of the budget comes from customs and VAT revenues.
Mr. Monti wants to reverse that relationship by having the European Union raise its own funds. He gave a list of the taxes and contributions that would be appropriate as direct sources of E.U. income.
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About the authors
Ruth Berschens heads Handelsblatt’s Brussels office and provides leading coverage of European policy. Jan Hildebrand leads Handelsblatt’s financial policy coverage and is deputy Berlin bureau chief. To contact the authors: [email protected] [email protected].
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