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22 October 2010

Brussels Mulls EU Taxes

In its recently published budget review, the European Commission highlights the growing need to generate new own resources for the European Union (EU) budget, and suggests, for example, the introduction of a financial transaction or financial activities tax - or even the introduction of a European value-added tax (VAT).

Alluding to the fact that member states’ contributions, based on their gross national income (GNI) now represent about 70% of the EU budget, the Commission has put forward the option of reducing these contributions by abolishing the VAT-based own resource contribution and by progressively introducing one or several new own resources as a replacement.

Here, the Commission suggests that possible candidates for new own resources could be a share of a financial transaction or financial activities tax, the auctioning of green house gas emission allowances, an EU charge related to air transport, a separate EU VAT rate, a share of an EU energy tax or of an EU corporate income tax.

Other findings outlined in the review are that the current rules for the EU budget make it slow to react to unforeseen events while too many complexities hinder its efficiency and transparency.

The Commission emphasizes that if Europe is to stand up to competition in a globalized world, it needs to foster smart growth. Therefore the EU budget must focus on added-value; identifying areas in which one euro spent at the European level brings more benefit than at the national level. Costly research and innovation investment as well as key transnational infrastructures should be financed at EU level, it notes, adding that the budget must also finance the European economy's drive into greener technologies and services.

Commenting on the review, European Commission President Manuel Barroso stated that:

“Today we present the Commission's ideas for the budget review. We encourage everybody to engage in an open debate without taboos, notably about the principles to underpin the future EU budget beyond 2013. At times where public spending is under pressure, we suggest ways to achieve a European budget that is up to the challenges we are facing collectively, not necessarily through increased expenditure, but by focusing on the right priorities, the added value, results and the quality of European spending. On the revenue side, it is high time to promote a fair and transparent system that is understood by citizens."

European Commissioner for financial programming and budget, Janusz Lewandowski stated that: "Europe and the world are changing". He added: "we must make sure that the EU budget is shaped to serve 500 million European citizens. The budget review is not about giving figures for the next financial framework, it is about learning lessons of the past and suggesting ways to adapt the budget to tomorrow's requirements. The EU budget must help deliver key policy priorities for European citizens, it must intervene where a euro spent at EU level brings more benefits than if spent at national or regional level, and it must focus on programmes that have a real positive impact. Furthermore, it must become a toolbox for good economic governance".

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