The European Commission argues that the debate among member states over funding the EU should move away from calculations about net contributions – who pays in what and who gets how much back out – towards a focus on European “added value”.
By this it means the EU should fund policies or projects that national governments would not or cannot. This change of mindset is, however, difficult to achieve, the Commission says, as long as 85% of the EU’s funding comes in the form of direct contributions from member states.
This is its rationale for proposing a reform of ‘own resources’: the system for raising funds for the EU over and above member states’ direct contributions. José Manuel Barroso, the European Commission president, said this is the first time since 1988 that the Commission has proposed a reform of the system.
The proposal would be based on taking a share of two tax streams: a reformed value-added tax regime, and a new financial transactions tax. Member states’ contributions are currently based on a share of VAT revenue. The VAT component accounts for 75% of the 85% that member states pay in contributions. The Commission wants a wide-ranging reform that would harmonise systems more closely.
A levy of 1%-2% would be applied on member states’ revenues under this revised system. Contributions based on VAT currently account for 11% of funding from member states. In the future, the new VAT-based levy would contribute 18% of own resources.
The second element would be a share of a new financial transaction tax. Estimates produced by the Commission suggest that this tax could produce €37bn annually. Janusz Lewandowski, the European Commissioner for financial planning and budget, said last week that the two new own resources could provide 40% of the EU’s financing needs by 2030, compared to around 15% coming from so-called traditional own resources (mainly import tariffs) in 2012.
National governments have already expressed opposition to any new taxes at EU level. There are also doubts that the EU’s national governments will agree to set up a financial transaction tax.
Barroso last week insisted the level of opposition had been exaggerated. EU leaders, he said, had agreed to such a tax. He added that ten member states already had taxes on financial transactions, and that the main argument for such a tax at EU level was to ensure the integrity of the single market.
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