31st Mar 2023

Common EU tax idea gains new life

New life is being given into the old idea of a common EU tax, following this weekend’s nightlong marathon battle over the future EU budget.

Commission president Jose Barroso said on Monday (19 December) a complete review of the budget is needed, with the aim of creating a whole new structure for EU common spending.

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"The structure and the methods used to negotiate the budget at the moment are not good, and I am increasingly convinced that we cannot go on like this."

"We need a systematic revision of the budget, looking at it without restrictions or taboos", he announced.

The commission's president would like to see future EU budgets not linked to national budgets, to avoid the impact of short-term pressure on member states.

Mr Barroso belongs politically to the European Peoples Party, whose leaders met ahead of the EU summit in Brussels on Thursday (15 December).

At the meeting, Austrian chancellor Wolfgang Schussel, Bavarian prime minister Edmund Stoiber and leader of France’s centre-right UMP Nicolas Sarkozy all supported the idea of an EU tax. Angela Merkel, Germany’s new chancellor, also expressed interest, reports the Financial Times.

Karl Aiginger, director at the Austrian Institute of Economic Research (WIFO) is also supporting the idea.

Speaking in a press conference on Monday together with Christoph Leitl, president of the influential Association of European Chambers of Commerce and Industry (EUROCHAMBRES), he called on the incoming Austrian EU presidency to test the possibilities to launch a discussion on a common EU tax.

Direct taxes are missing as an important fiscal instrument, he said, and listed a number of possible sources for future EU tax revenue, such as taxation of international financial transactions, energy or CO2 emissions as well as tobacco and alcohol.

But any change to the current system of the financing of the EU budget will be hard to achieve.

Currently, a gross national income-related contribution, plus revenues from customs duties, agricultural levels, fines and 1% of the VAT base make up the income side of the EU budget.

A number of countries, with Britain as the most outspoken, have traditionally opposed contributions to the budget through direct EU taxes - something which can only be agreed unanimously by member states.

According to the deal among EU leaders at 3am on Saturday, the total EU income must be below 1.045 % of the gross national income (GNI).

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