Herman Van Rompuy: Europe's first president to push for 'Euro tax'

Telegraph UK (Link) - Bruno Waterfield, Justin Stares and Colin Freeman (November 22, 2009)

Within days of taking office in January, the former Belgian prime minister will put his weight behind controversial proposals already floated by the commission's head, Jos� Manuel Barroso, for a new "Euro tax".

He will add credence to Mr. Barroso's plans, to be formally tabled in the New Year, by arguing for a Euro-version of a "Tobin Tax" � a levy on financial transactions already floated by Gordon Brown as a solution to the international banking crisis. It would result in a stream of income direct to Brussels coffers, funding budgets that critics say are already rife with waste and overspending.

Mr. Van Rompuy, 62, who was appointed to the newly-created �320,000-a-year post at last week's special EU summit, set out his stall on direct Euro-taxes during a private speech at a recent meeting of the Bilderberg group of top politicians, bankers and businessmen. The group officially meets in secret, but when selected details of his remarks leaked out, his office was forced to issue a public statement on his behalf.

"The financing of the welfare state, irrespective of the social reform we implement, will require new resources," he said. "The possibility of financial levies at European level needs to be seriously reviewed."

Mr. Barroso, whose commission acts as the European Union's executive arm and civil service, has set out alternative plans for a Euro tax that would involve Brussels taking directly a fixed percentage of VAT and fuel duties. While these taxes already help to fund EU spending � set at �121 billion next year � they are currently gathered by the treasuries of individual nation states, from which varying sums are paid into EU coffers.

A new Euro tax could appear on all shopping and petrol station receipts, showing the amount of VAT or fuel duty creamed off directly to Brussels. Supporters say it would take a fixed proportion of the existing tax revenue rather than increase it overall, and make the cost to taxpayers of running the EU more transparent. Critics argue this could backfire by increasing anti-Brussels sentiment.

Mr. Van Rompuy has not set out in detail exactly which tax raising mechanisms he favours most, but after the Bilderberg meeting his spokesman said he would look favourably on either green taxes or a version of the Tobin Tax, originally proposed in 1972 by the US economist James Tobin as a tax on currency speculation.

Mr. Brown floated this earlier this month as a way of financing future bail outs of the banking system, although he meant it for global rather than purely European purposes.

But whichever revenue-raising mechanism was used, the backing of two of Europe's most senior apparatchiks for the idea in principle will give it extra momentum.

Opponents of the idea could also underestimate Mr. Van Rompuy's determination to get his own way. Ostensibly chosen for his new job because of his skill as a consensus-builder, he is also known as a skilled and ruthless political operator, who is happy to play rough as well as smooth. Last year he ordered the locks to be changed on a chamber in the Belgian parliament in order to prevent deputies holding a politically disruptive debate. According to Belgian newspaper De Morgen, van Rompuy told colleagues a few weeks ago that to achieve a top EU function you must "not ask for high office, but become a grey mouse, and offers will come."

Mr. Barroso, meanwhile, has just been reappointed to his post by member states for a second five year term, freeing him to push his tax agenda in bolder fashion than before. Any move towards Euro taxes, however, will encounter bitter opposition from British Conservatives.

"Any kind of harmonised tax system will remove control over our national tax systems," said Timothy Kirkhope, leader of the Britain's Conservative MEPs. "Competition in Europe depends on member states being allowed to have competitive tax regimes."

In opposing any Euro-tax plans, the Tories will find an unlikely ally in Mr. Van Rompuy's sister Christine, 54, a left-wing nurse who joined the Marxist Belgian Workers' Party after witnessing the Belgian government's privatisation of the health service. She is now one of her brother's staunchest political critics, and the brochure used by her party features a picture of her brother dressed as a clown.

"I disagree with my brother's ideas for a green tax," she said. "Any new taxes would be paid by the poor. We need to tax the rich."