Brussels feels time is right to suggest EU tax

EU Observer (Link) - Honor Mahony (August 9, 2010)

As the economic downturn sees many member states seek ways of cutting back on public spending, the European Commission believes the time is right to put the thorny idea of the EU raising its own taxes back on the table.

EU budget commissioner Janusz Lewandowski told German daily Financial Times Deutschland that the feelings on the idea of an EU tax had changed in national capitals.

�Many countries want to be unburdened. In this way, the door has been opened to think about revenues that are not claimed by finance ministers,� he said.

If the EU raised its own taxes, then member states could pay less to the EU from their national budgets is the thinking in Brussels. Member states currently pay towards the EU budget based on gross national income, as well as VAT and customs duties.

However, these sources only make up about 12 percent of EU revenue. �The national credit transfers in 1988 were only 11 percent, now they account for 76 percent of our revenue,� said Mr Lewandowski. �That was not the intention of the founding fathers.�

�If the EU had more of its own revenues, then transfers from national budgets could be reduced. I hear from several capitals, including important ones like Berlin, that they would like to reduce their contribution,� he added.

He indicated that possible tax sources for Brussels could include an aviation tax and a financial transaction tax. Mr Lewandowski also has his eye on the money raised from the auctioning of CO2 emissions rights, something due to start in 2013.

He is to unveil his ideas in September. But although the commissioner senses a change in attitude among some member states, his plans are set to be highly controversial.

Several member states oppose the idea of an EU tax in principle, believing it to resemble too much a state-like power.

However, commission officials are said to be counting on a feeling among EU citizens that banks and other financial institutions should pay for sparking off the global financial crisis, meaning that a financial transaction tax with the proceeds going to the EU might be less unpopular than in the past.

There is hope that an ambitious Danish EU presidency in the first half of 2012 could seal a deal, a senior official recently told EUobserver.

The EU has a seven-year budget. The current cycle runs from 2007 to 2013. Negotiations on the budget are traditionally full of ill-humour and sniping between member states.

This next round is set to be worse than usual, with governments already feeling the pinch and other highly controversial issues, such as reform of the budget-gobbling farm policy, also up for discussion.