EU President To Push 'Euro Tax'

by Ulrika Lomas, Tax-News.com, Brussels

24 November 2009

It has emerged that one of newly-selected EU President Herman Van Rompuy's first actions will be to push for the imposition of an EU-wide tax on financial transactions.

Van Rompuy, the Belgian Prime Minister, was chosen by EU leaders to take up the post, created by the Lisbon Treaty, last week. He is known to support the creation of a new "euro tax" to provide funding for the EU's EUR120bn budget.

Currently, the EU's budget is funded through a combination of value-added tax (VAT) receipts, import duties and direct contributions from member states, a system which has led to resentment in some of the larger member states, which don't see why they should end up indirectly subsidising public projects in the newer and poorer member states.

It is understood that Van Rompuy's preferred method of funding the budget would be through some form of "Tobin tax" on financial transactions or the banking sector, or through the levying of a new environmental tax.

Although Van Rompuy is not due to take up the post until January 1, 2010, he has been forced to issue a clarification of his intentions following his recent speech at a private meeting of the Bilderberg Group in Berlin, an annual closed-door conference involving influential politicians, business people and bankers, after details of his speech leaked out.

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

While the idea of a Tobin tax is supported by British Prime Minister Gordon Brown, he intended such a levy to be imposed at a global rather than EU level, and Van Rompuy's proposal is bound to divide the EU, with member states whose economy relies on financial services and banking likely to be the most opposed.

The call for a "euro tax" will be met sympathetically by European Commission President Manual Barroso, who was recently reappointed to another five-year term as leader of the EU's executive body. Barroso is also known to be an advocate of an EU-wide levy to support the bloc's budget, although he favors a system whereby a proportion of national VAT revenues and fuel duty would be transferred into Brussels' coffers.

Recommended