Brussels Proposes 'Euro-Taxes' to Fund EU

Weary of relying on money transfers from cash-strapped national governments for its funding, the European Union will next month table proposals to finance more of its activities through a raft of dedicated EU-wide taxes, in proposals that met on Monday with stiff resistance from some member states.

The European Commission intends to show how new “eurotaxes” on banks, financial transactions, air travel and carbon permits could help meet a bigger share of the bloc’s annual budget, thus reducing regular payments from national treasuries, officials said.

The EU has traditionally relied on a mix of regular transfers from its 27 member states and its “own resources” – mainly import duties on goods brought into the EU single market – to finance itself. The proposals come at the start of negotiations for the next seven-year EU budget round, which starts in 2014.

But as its budget has grown to 140 billion euros ($185 billion) a year – equal roughly to 1 percent of the bloc’s gross domestic product – the share of “own resources” has slipped to under a quarter of raised revenue, compared to 89 percent in 1988.

Janusz Lewandowski, EU budget commissioner, on Monday told the Financial Times Deutschland newspaper that “the present structure of the revenue of the EU does not reflect the spirit of [EU] treaties” and that he would unveil proposals to raise the proportion of revenues from directly paid taxes.

As recently as January, Mr Lewandowski said that “Europe is not ready for a European tax” and admitted even on Monday that rebalancing the EU’s income would face a test of “political feasibility”. But the idea of a financial transaction tax on international money transfers, currently being mooted at EU level, had changed the nature of the debate, he said.

People close to the Polish commissioner highlighted that the proposals would reduce the annual check written by national governments to Brussels, a key selling point. But, conversely, it would deny national governments taxes that otherwise could accrue to them, they admitted.

“The question of what percentage of the EU budget should come from ‘own resources’ is part of the traditional Brussels agenda,” said Jean Pisani-Ferry of Bruegel, a Brussels think-tank. But he warned: “Politically, achieving change will be completely unrealistic at this stage.”

Both Germany and the UK offered rapid rebuffs on Monday to the principle of new EU-controlled taxes. “We will deny an EU tax or EU involvement in national taxes,” a German finance ministry official told reporters on Monday.

UK commercial secretary Lord Sassoon said the coalition government would veto such tax plans: “The UK believes that taxation is a matter for member states to determine at a national level.”