By Bruno Waterfield - 13th July 2004
European taxes on petrol, aviation, business and an EU-branded VAT rate are among controversial budget proposals unveiled by Brussels.
The European Commission's seven-year spending blueprint is set to come under attack on three major fronts and prompt accusations that ‘financial perspectives’ for an enlarged EU are unrealistic.
Calls for European taxes to raise the EU’s ‘own resources’ are set to be resisted as an encroachment on the jealously guarded powers of national treasuries.
Plans to scrap a €4 billion EU rebate for Britain may fall foul of London’s national veto as the commission calls for the pain of paying for an EU budget increase of €28 billion between 2007 and 2013 to be shared.
And penny-pinching governments are poised to take the axe to the EU executive’s demand for a 24 per cent hike in contributions.
EU tax
EU budget chief Michaele Schreyer is backing a genuinely European tax for funding Europe’s institutions and policies.
The German commissioner argues the current system “depends increasingly on transfers from national treasuries, instead of being based on real ‘own resources’, as foreseen by [EU] treaties”.
Schreyer is urging national governments to create “a main fiscal resource based on either energy, VAT or corporate income tax” by 2014.
Commissioners believe the move would make EU funding more “transparent” and, whether as a popular issue or not, increase understanding among Europe’s citizens.
“The proposal reflects the nature of the EU as a union of member states and citizens by clarifying the link between the taxpayer and the EU budget,” Schreyer said.
Brussels taxman
Moves to create a Brussels tax-collector would, Schreyer suggests, end rows over the individual EU membership dues paid by national treasuries and economies.
“It will help us move on from the sterile debates about member states net contributions by ensuring that resources are collected across the EU as imposed and not simply from national treasuries,” she said.
Schreyer is backing an EU-branded VAT charge offset by a decrease in national rates. “EU and national VAT should appear as separate taxes on the invoices or receipts,” she proposes.
But the call for an EU tax is unlikely to appeal to Europe’s capitals, sections of industry or some consumers.
EU tax on planes and petrol
Brussels is also seeking new taxes to fund a more integrated EU leading to new burdens on energy consumption, including petrol, and possibly a European levy on aviation fuel.
The move may well see road hauliers and users, air carriers and passengers joining forces with national treasuries to oppose the commission budget plan.
Most implausible, considering deep EU divides on taxation governance, is a call for a European corporate income tax – a problem acknowledged by the commission.
“This alternative would take longest to implement, both from a political and from an administrative perspective, since a political agreement would be needed on the principle of achieving harmonisation of the tax base, before setting a minimum rate,” said a Schreyer statement.
Commissioners, wary of being branded naïve over the tax proposal, admit that a “fully tax-based system is not realistic at this stage of EU integration”. “The fiscal resource would be introduced progressively,” said a commission statement.
'Own resources'
Currently EU budgets work within a maximum 'own resources' payment ceiling of 1.24 per cent of Europe’s Gross National Income (GNI).
The cash is derived from a variety of nationally administered sources – including VAT, agricultural and customs duties - to cover the financing of EU expenditure.
But since the 'Delors I package' in 1988 the so-called 'fourth resource' based on and supplementing VAT and duties has become “more and more” important as a part of national contributions.
And developments in this area of fundraising is viewed by Schreyer as the building block for an EU tax.
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