EU Taxes Edge Nearer

by Ulrika Lomas, Tax-News.com, Brussels

04 July 2011

European Commission President Jose Manuel Barroso has recently unveiled details of the Commission’s proposals for the European Union (EU) 2014-2020 multi-annual budget, providing for a fundamental reform of financing, to be achieved by means of a European financial transactions and sales tax.

Despite strong opposition and reservations from EU member states, the Commission is determined to press ahead with its plans to finance the majority of its budget via the introduction of new EU taxes imposed across all 27 member states. Up until now, around three quarters of the EU’s budget has been derived from direct payments from member states, while the remainder has been yielded by the EU’s own means, notably from customs duties levied at EU borders. In return for agreement on the levies, contributions from member states would be reduced to around a third.

Alluding to the proposed future financial framework as “an innovative budget” with “very concrete priorities” and “a very important goal”, namely boosting energy efficiency, combating climate change and promoting social targets, Barroso emphasized that the Commission is proposing a new system of resources based on a tax on the financial sector and on existing VAT. While conceding that the framework is an “ambitious budget”, Barroso stressed that it is also a “responsible budget”.

Concluding his statement, Barroso explained that the European Parliament, EU member states and the Commission now have the task of transforming these proposals into an agreement. Difficult discussions lay ahead, he added. A consensus from all member states is required, however, to implement the plans.

Indeed, Germany, France and the UK remain fiercely opposed to the introduction of any new EU taxes, and in particular to the idea of taxing the financial sector to fund the EU budget. Although Germany, France, Austria and Luxembourg have for a long time been calling for the introduction of a financial transactions tax, preferably at international level, they insist that the product of the tax should flow directly into national budgets.

Adamant that it will block any such plans, the UK has argued that any additional fiscal burden will prove harmful both for businesses and for competitiveness within the EU.

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