EU Wants To Tax Europeans To Replace National Contributions

• European commission proposal would end Britain’s rebate
• Brussels wants to borrow large sums for infrastructure projects

European commission president, José Manuel Barroso, also wants to reform the EU’s ‘Byzantine set of corrections and trade-offs’. Photograph: Georges Gobet/AFP/Getty Images

The EU executive made its case today for a new system of European taxation to streamline and underpin Brussels’ budget, replacing the contentious regime of national contributions as the basis for EU funding.

In the opening salvo of what promises to be a bruising, two-year battle to set EU spending up to 2020, the European commission argued for a phased end to, or reduction of, national contributions and the introduction of new budgets based on “own resources”, tax revenue directly levied by Brussels.

The new system could involve a dedicated European VAT rate, with the money raised going to Brussels, as well as EU taxes on air travel, carbon emissions, banks or financial market transactions.

“The current system of EU financing has evolved piecemeal into a confusing and opaque mix of contributions from national budgets, corrections and rebates,” the commission said. “A fresh look is essential, to re-align EU financing with principles of autonomy, transparency and fairness.”

The commission, presenting its budget reform plan to the European parliament in Strasbourg, also said that Brussels should be empowered to borrow large sums on the markets, using the EU budget as collateral by issuing bonds to underwrite major infrastructure projects. It also wanted the current seven-year budget planning periods extended to 10 years.

“The commission does not believe that the current mix of member state contributions and own resources is the right one,” said José Manuel Barroso, the commission president. “This is not a question of an EU tax but of finding new sources of financing to gradually replace member states’ contributions.” He added: “We also need to look at the byzantine set of corrections and trade-offs,” indicating an end to the £2.6bn annual rebate to the UK.

This year’s EU budget is €132bn (£116bn), 2.5% of public spending across the 27 states. Three-quarters of that comes from countries’ contributions, with the remainder generated by a proportion of states’ VAT and customs receipts.

While today’s proposals concerned 2014-2020, the commission is also pushing for a 6% increase in next year’s budget, prompting warnings of “a backlash against Brussels” by Vince Cable, the business secretary.

The logic of today’s proposals would be to do away with “Margaret Thatcher’s rebate”, the refund, about €3bn a year, won by the Tory prime minister in 1984 and a perennial source of friction between Britain and the rest of the EU.

Last month in Brussels, George Osborne, the chancellor, insisted the rebate was non-negotiable.

Ian Traynor Brussels
Tuesday 19 October 2010 21.03 BST

Source: The Guardian

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